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HomeFinanceHow Renters Can Grow Wealth, Too

How Renters Can Grow Wealth, Too

One of the most persistent personal finance myths that you’ll hear repeated often is “Renting is just a waste of money!” People who say this believe that buying a house is the only way to build wealth. Fortunately, it looks like this notion may finally be going the way of the dodo.

According to Zumper’s Annual Rental Report for 2023, 52.7% of respondents believe that “the new American dream is to move away from homeownership.” Clearly, these people have realized the benefits of renting and recognize that taking out a mortgage loan that is then paid off over time is not the only way to find happiness and financial security. In fact, renting is a perfectly valid way to keep a roof over your head, and if you put your extra money to work for you, you can increase your wealth.

Renting offers solid benefits

While I’m currently preparing to become a homeowner again (and under much better circumstances than the last time I was a homeowner), I have no regrets about all my years as a renter. Renting comes with some pretty interesting advantages. For one thing, it’s much cheaper than owning a home. The costs of homeownership are broad and deep, and go far beyond the money you pay a mortgage lender.

You need homeowners insurance and will have to pay property taxes. You may also owe homeowner’s association dues (depending on where you live). But one of the biggest ongoing costs of owning a home is maintenance and repairs. This ranges from the routine and predictable (gardening, cleaning gutters several times a year, boiler maintenance) to the unplanned and often very expensive (like a new water heater or a major plumbing repair). Research from The Ascent found that in 2019, homeowners paid an average of $8,609 more than renters each year.

Beyond saving money, renting also offers flexibility – this is the benefit I’m most grateful for. I spent most of my adulthood in a career that had me moving constantly to gain experience and expand my resume, and if I had bought and sold houses every time I moved, it would have been a huge net loss to my finances (honestly). , even moving so frequently as a tenant was expensive). It is much easier and cheaper to break a lease than it is to sell a home.

Buy a house to build a home, not invest

Despite all the extra expenses that come with owning a home, it’s something many people dream of (trust me, I know, since homeownership is my New Year’s resolution). Part of that appeal is that when you buy a home, you get an ownership stake in an asset that increases in value in many cases. As you pay off your mortgage, you are building equity against which you can borrow. And ideally, one day you will own your home outright and be able to sell it for a profit.

More: Check out our picks for the best mortgage lenders

That said, all those extra costs you take on mean it’s best to think of buying a home as a stable, safe place to live, rather than as an investment.

How much wealth could you generate as a renter?

Investing in the stock market over a long period of time can be a great way to get rich over time, and it doesn’t involve maintenance costs or homeowner’s insurance.

If you don’t feel like ownership is for you, but are wondering how direct investing would fare, try this. Sit down with some realistic estimates of how much more you could pay if you bought a home instead of renting. It may take some research to come up with that figure: start by checking home listings in your area for prices, see what the average mortgage rate is today, and ask people you know how much they pay for expenses like property taxes. Property and Homeowners Insurance.

If you plug those numbers into a mortgage calculator, you can roughly project your monthly costs as a homeowner. (This won’t include how much you might pay for a new roof in a few years, but remember, those unpredictable costs are what make home ownership such an expensive prospect.)

Let’s say you come up with a figure of $2,500 a month, but you rent for $2,000 a month. If you invested that extra $500 a month and earned a return of just 8% (a conservative estimate; the stock market has averaged annual returns of 10% for the past five decades), here’s how much that money could grow over time:

Years you are investing

Cash you contribute

Total with 8% return over time










Data source: Author’s calculations using

Yes, you can buy a home and watch its value increase to $685,000 while you own it. But you will also have to invest a lot of money and work during that time. Don’t fall into the trap of thinking that becoming a homeowner is your only ticket to financial security. Getting serious about investing can also lead you to success.



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