A typical American household needs almost 15 years to save for a home and then come out ahead of renting, according to a recent Zillow analysis. In San Jose, the combined timeline stretches past 49 years.
Rent
Renting puts a roof over your head. That’s it. Every payment covers the month and builds equity for the landlord, not you.
However, in the costliest markets, San Francisco and San Jose among them, renting is cheaper than a 30-year mortgage. It can be a practical financial decision when the monthly savings are real, and you invest what you save. It is a financial position, not a failure to buy.
Around 35% of U.S. households rent. This lets them avoid many homeownership expenses, but they still need to protect the contents of a rental home. Renters insurance covers your belongings and your liability for far less than what a homeowner pays, and comparing quotes keeps the price low.
For about $22 a month, renters insurance covers $30,000 of your belongings, $100,000 in liability if a guest gets hurt, and your hotel bill if disaster puts you out. Compare real-time quotes side by side with Insurify without the spam. It’s fast and rated 4.7 stars on Trustpilot. See your lowest rate in minutes.
Buy
Buying the home you live in is, ideally, a real estate investment, too. A fixed-rate mortgage locks the principal and interest on your loan, and each payment brings down the balance. Dave Ramsey considers this a better option than renting and investing the difference.
The catch is time and money up front. Zillow clocks the national wait at 8.5 years to save a 20% down payment, then another 6.2 years before owning beats renting, nearly 15 years combined.
Memphis breaks even in under 11 years, with Pittsburgh, Detroit and Indianapolis close behind. California runs the other way: San Jose at 49.2 years, San Francisco at 46.9, San Diego at 40.4 and Los Angeles at 37.7. A national housing shortage Zillow estimates at 4.7 million homes helps keep those timelines long.
Austin buyers can save a down payment in about eight years, then need roughly 18 more to break even, because rents there have fallen and stayed cheap. Affordable rent, oddly, is what makes buying take longer to pay off. Targeting a starter home cuts the national wait to about 7.2 years, though buyers have shown little appetite for costly fixer-uppers at today’s prices.
Invest
Renting or buying is as much about where you want to live as about cost or financial growth. In its purest form, real estate investing is only about getting a return.
Some platforms let people buy fractional stakes in rental properties without a mortgage or a landlord’s workload. Fees, limited liquidity, how the underlying property performs and the risk of losing money all still apply. This type of investment doesn’t stop you from renting or buying a home you live in, but it does give you a stake in managed real estate not tied to your living arrangements.
Arrived lets you buy shares of professionally managed rental homes for as little as $100 — and collect your share of the rent as dividends. Values can fluctuate, so it’s best for money you can leave invested for years. Browse available properties today.
What to do?
There is no requirement to choose. You could buy a rental property, live in another rental property yourself, and diversify with a fractional real estate investment through Arrived.
These are personal decisions as much as financial ones. But if your circumstances allow, and you have over $100,000 in savings, consider getting advice from a pro. SmartAsset offers a free service that matches you to a vetted, fiduciary advisor in under five minutes.
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