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I’d say it’s a matter of financial focus. Wealthy people acquire assets that pay for their liabilities, non-wealthy people aquire liabilities. No matter how you look at it, you have to have shelter, so from one point of view, your interest payments on a house are tax deductible and rent is not. If you are going to pay for shelter anyway, why not get a tax break. On the same token, you’ll be building your FICO while paying a conventional mortgage on your home. If you can rent cheaper, however, you’ll have better monthly cash flow to put into locating deals. Either way, when you buy your home, use the same criteria you would for an investment home. Don’t pay retail for your personal residence. You can take a large gain tax-free from the sale of your primary residence after living there for two years. If you buy your PR at a discount you can free up more cash flow and take advantage of all the tax benefits. I wouldn’t think it mattered which you did first, just that you buy right either way. With money, it always boils down to ROI. Whatever gives you the best yield for your money is the right choice - unless it is immoral!!! I can turn a kilo of cocaine into a lot of crack for a great ROI, but I don’t think it is the morally right choice!!! Had to throw that one in there!!!
Michael makes excellent points.
To offer additional opion…I don’t think it is right or wrong to do either.
To those that say that renting is more expensive than buying - depends on your market. We all know there are markets where a $500,000 house isn’t going to rent for $5k per month so you can experience negative cash flow on rentals quite easily. Is the negative cash flow offset by the tax break? If it is then renting is slightly more expensive or the same ‘cost’ as purchasing. However, if it’s not and the only way to make money is appreciation then renting is ‘cheaper’ than buying.
Also, lets say you buy a house as investment and don’t own a personal residence. You can live in that house as your personal residence for a period of 2 years during a 5 year span (as long as it is where you live at the END of that time when you file taxes) and your profits would be tax free (up to the expemtion limits and less the amount you depreciated the asset), so it’s not necessarily a bad idea to do it this way.
Bottom line, run the numbers. Each scenario is right sometimes, wrong sometimes and there is no concrete absolute truth to either stance.