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The debate continues: Renting vs. buying

Posted Nov 15 2007, 05:12 PM by Karen Datko
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The subprime mortgage fiasco has refueled the debate over whether it makes better financial sense to buy or rent a home. Rob at TwoWiseAcres makes a good case for buying (and this is from a guy who makes money investing in rental property). He writes about taxes, leverage and inflation, but his essential point is this: The value of your home will increase over time but your mortgage payment will be fixed. He includes this piece of advice a lot of people probably wished they had followed: "If it takes more than 10 words or so to describe the terms of a loan (as in, 'Your mortgage is a 6.5% fixed-rate 30-year loan.') be afraid, be very afraid."

On the other side, Millionaire Mommy Next Door makes a convincing case for renting. After all, she is a millionaire and she rents. Mommy argues that if you invest the money you'd otherwise spend on a home, you'll end up with more wealth and free time. For her, the American dream is not a piece of real estate. It's freedom to do what she wants.

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Comments

 

Thanks for linking to my rent vs buy discussions. It's been an interesting debate! I've heard said that the "New" American Dream is time, not stuff. Yes, for me anyway, financial freedom makes me happier than whether I pay rent payments or mortgage payments. In today's real estate market, renting affords my family freedom.

Millionaire Mommy Next Door (Posted 11.15.07 11:59 PM ) Report Abuse

I appreciate the link to my post in defense of home ownership.  Certainly the decision whether to rent or buy is an individual one, and some will be better off renting while others better off buying.  It does seem, though, that the shift toward favoring renting has coincided with the market decline, which should actually encourage buying not renting.  I've often thought about selling my home, becoming debt free, and renting.  The reality for me, though, is that this would not make me more financially free than I am now (I'd still have to pay rent), and I think it would make me poorer in the long run.  But the debate on this topic is important and worthwhile.

Rob (Posted 11.16.07 8:13 AM ) Report Abuse

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