How Renting a Home Can Make You Richer Than Owning

renters
Photo by Monkey Business Images / Shutterstock.com

Buying a house with a white picket fence is the American dream. But owning a home is not necessarily a wealth builder.

Research released last year indicates most folks are better off renting a home and investing the savings in stocks and bonds. That’s because gains from stocks and bonds historically exceed gains from property appreciation, according to faculty at three U.S. universities.

Study co-author Ken Johnson, a real estate economist at Florida Atlantic University, explained their findings:

“On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds.”

Therein lies the hitch, though: To build wealth, renters must actually reinvest savings. In other words, renters will only build wealth if they take the money they would have put into buying a home and instead invest it in stocks and bonds, rather than spend it.

As the study puts it, “households that fail to reinvest buy-rent cash flow differentials accumulate less wealth.”

Getting the best deal on a rental

If this study has convinced you that renting is the way to build wealth, make sure you find the right rental at the best price.

Educating yourself about the rental market is the best way to get a good deal. For example, now is a great time of the year to rent. As we have written:

Landlords are especially anxious to rent between October and February. You’ll find more specials and choices when you shop for a rental at a nonpeak time.

For more tips on landing a great rental, check out “10 Ways to Save Big on Renting Your Next Home.”

However, if you just can’t resist the pull of owning a piece of the American dream, save yourself some money by checking out “How to Buy a House — Getting the Best Deal on a Mortgage.”

What are your thoughts on renting versus buying a home and how homeownership impacts wealth? Share them with us by commenting below or over on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
5 Monthly Bills You Can Easily Negotiate Down
5 Monthly Bills You Can Easily Negotiate Down

Here’s how to bring down recurring expenses and save hundreds — or even thousands — of dollars each year.

7 Free Tools for Saving More Money at Amazon
7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

7 Reasons You Should Change Careers After Age 50
7 Reasons You Should Change Careers After Age 50

Many older workers have the energy and experience to make a successful career change.

60% of People With This Disease Don’t Know They Have It
60% of People With This Disease Don’t Know They Have It

Millions of people overlook this potentially potent condition that tends to strike women and older adults.

4 Streaming TV Services That Cost $20 a Month — or Less
4 Streaming TV Services That Cost $20 a Month — or Less

Here’s how to ditch cable and satellite TV — and save a bundle — without giving up your favorite shows.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on these familiar purchases. Yes, even pregnancy tests.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

9 Indestructible Products That Are Worth the Price
9 Indestructible Products That Are Worth the Price

If you’re willing to pay a little more for these products, you may never have to shop for another again.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.