"Renting is throwing money away" might be the most repeated—and most wrong—financial advice. Let's look at the real math.
The Full Cost of Owning
People compare rent to payment. That's wrong. The real comparison:
| Renter Costs | Owner Costs |
|---|---|
| Rent | Mortgage payment |
| renter's insurance ($15/mo) | Property taxes (1-2% of value) |
| Homeowner's insurance | |
| Maintenance (1-2% of value) | |
| HOA fees (if applicable) | |
| (if <20% down) | |
| (~2-5%) |
Watch Out
A $2,000 mortgage often means $3,000+/month in true ownership costs.
What You "Build" as a Renter
Renters don't build . But they CAN build wealth:
Invest the difference:
- Own: $3,000/month housing cost
- Rent: $2,000/month rent + $1,000 invested
$1,000/month invested at 7% for 10 years = ~$170,000
That's equity too—just in a different form.
The Break-Even Timeline
Generally, buying makes sense if you'll stay 5+ years. Here's why:
| Years | What Happens |
|---|---|
| 0-2 | Transaction costs eat any gains |
| 3-4 | Might break even |
| 5-7 | Buying typically wins |
| 7+ | Buying usually wins by more |
But this depends heavily on your specific market, interest rates, and rent vs. price ratios.
The Price-to-Rent Ratio
A quick way to compare:
Calculation: Home price ÷ Annual rent = Ratio
| Ratio | What It Means |
|---|---|
| Under 15 | Buying favored |
| 15-20 | Close call |
| Over 20 | Renting favored |
Example:
- Home price: $400,000
- Equivalent rent: $2,000/month ($24,000/year)
- Ratio: 400,000 ÷ 24,000 = 16.7
In this market, it's close. Run the full numbers.
Non-Financial Factors
Reasons to Buy
- Want to put down roots
- Want to customize/renovate
- Lifestyle stability matters
- Plan to stay 7+ years
Reasons to Rent
- Flexibility for career/life changes
- Don't want maintenance responsibilities
- Uncertain about the area
- Market is very expensive
"I bought a house at 28 because 'that's what you do.' Took a job offer in another city 2 years later and lost $40,000 selling. Wish I'd just rented."
If You Decide to Buy
Our lessons cover the process:
- Saving for house [[down payment]] — How much you really need
- Mortgages 101 — Understanding loan options
And for the wealth-building side:
- Wealth tier: Real estate investing intro — When property becomes an investment
The Rent-and-Invest Strategy
For expensive markets where buying doesn't make financial sense:
- Rent a reasonable place
- Calculate what you'd spend owning
- Invest the difference religiously
- Build wealth through stocks instead of housing
Pro Tip
This strategy has outperformed buying in many expensive cities (SF, NYC, LA) over the past decade.
The Right Answer
There's no universal "buy" or "rent" answer. It depends on:
- Your local market's price-to-rent ratio
- How long you'll stay
- Your financial situation
- Your lifestyle preferences
Quick Win
Calculate the price-to-rent ratio in your area. Look at homes you'd want and compare to similar rentals. If the ratio is over 20, renting and investing may build more wealth.