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
7 Surprising Ways Retirees Waste Their Savings
7 Surprising Ways Retirees Waste Their Savings

You can make your retirement money last a lot longer by avoiding these costly mistakes

8 Surprising Facts That Nobody Tells You About Retirement
8 Surprising Facts That Nobody Tells You About Retirement

Knowing what to expect in advance can help you prepare for — and adjust to — life in your golden years.

7 Reasons You Should Not Pay Off a Mortgage Before Retirement
7 Reasons You Should Not Pay Off a Mortgage Before Retirement

Here’s why it often makes financial sense to carry a mortgage into retirement.

View this page without ads

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

Get Started

Comments

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.

Trending Stories