Take the asking price of the home you are considering buying and divide it by the amount of rent you would have to pay annually to live in it (or a comparable home). The resulting number is the "housing ratio." The higher the ratio (more than 20), the more it makes sense to rent. The lower the ratio, the more it makes sense to own. A ratio well below 20 indicates buying is a more attractive option.
From the book: "The Smartest Money Book You’ll Ever Read."
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