Buy a House or Start a Business: Which Comes First?

March 25, 2021
Buy a House or Start a Business: Which Comes First?

Should you buy a house or start a business first?

Two of the biggest decisions in our lives are when we decide to buy a house or start a business. Sometimes we are unsure which milestone we should take care of first, and we might feel torn between building a company and buying a home.

We’re going to come right out and say it: If you’ve got the funds to do so, building your business first is always better.

Below is an excerpt from an article by K. Mathias on Create My Independence:

“I’m 28 years old. I’ve been with the same employer for over 5 years, make an above average salary and I don’t plan on leaving the area in the next 5 years. I also am debt free and have 20% of a potential home’s purchase price in the bank on top of a healthy 6 month emergency fund.

My point? I could buy a house tomorrow if I wanted to. Instead, I rent and don’t plan on changing that anytime soon. What if you were in my position? Would you continue to rent or buy? I’m betting many of you would buy, wouldn’t you?”

He goes on to explain that the reasons for building a business before you buy a house. Let’s look at the reasons you should start your business before you buy a home.

Buy a house or start a business?

If you wait, you can buy the house in cash

Buy a house or start a business? If you have enough money for a down payment on a house right now, you’ve got enough to start building a business that you’re passionate about.

Invest in your business now, trusting that smart investments will always pay off later and enable you to make a large cash purchase, like a home. Additionally, by the time you’re bringing in money and have enough saved to buy the house in cash, you’ll probably have a better idea of where you want to put down roots and buy your home.

The growing ‘house poor’ problem

Being ‘house poor’ is owning a beautiful, expensive home–or just one that you can’t really afford–and spending most of your income each month on rent, maintenance, repair issues, upkeep, and more.

In this case, you might not always have enough money left over to cover other expenses, like gas or groceries, hence the term ‘house poor.’ 

You can avoid this problem by buying a house later when your income is steadier and higher.

If you are buying a house now, be sure to stick within your price range. Living in a home you can’t afford will only cause you financial headaches each month.

Homeownership isn’t the best place to invest

If high investment returns are what you’re looking for, homeownership is not the avenue for you.

Depending on where you live and the state of the real estate market locally and nationwide, owning a home can (at worst) offer low or nonexistent returns, especially in a housing market crash.

In the best-case scenario, you jump on a housing boom and manage to come away with a nice profit, but this is the exception to the rule. 

Buying a home costs more than renting

It’s often argued that owning a home is cheaper than renting, but that’s not true in the long run.

A 30-year mortgage may look like it’s cheaper than renting in the long run (for example, say rent=$1200/month, while mortgage=$800/month). This can be deceptive, however, because owning a home comes with the added costs of home maintenance and upkeep, interior and exterior decoration, routine and major repairs, etc.

As the homeowner, you alone are responsible for those costs. If you were renting instead, those costs would be the responsibility of the property owner, saving you money, time, and headaches. 

You’re stuck until you sell

If you’re interested in, planning on, or already engaged in starting a business, you need to be sure that your location is really where you want to stay before you buy a home.

A few more years in business will give you a better idea of where your location should be. That’s one more reason to start your business before you buy a home. 

The worst position to be in is to purchase a new home, only to find the perfect location for your business is in another state. You’re then stuck in that home until you manage to sell your house, which is a long and tedious process.

When you’re considering whether to buy a house or start a business first, you’re better off building your business first and buying the home after you’re sure you want to be rooted somewhere.

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