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Why renting may now be a better financial move than buying
Not long ago, buying a home felt like an automatic milestone in many American adults’ lives, but those days are increasingly behind us. In 2025, home sales reached a new 30-year low, and with homeownership out of reach for many Americans, more people are renting to preserve their monthly cash flow.
The housing affordability crisis facing America has raised plenty of questions. Is buying still a smart financial move in today’s market? Does renting offer more financial breathing room in both the short and long term? What other choices do renters have to build wealth outside of homeownership?
In this article, TurboTenant runs a detailed comparison of renting versus buying a home, including monthly costs, the flexibility that comes with renting, and the hidden expenses of ownership that buyers might not see coming. The story will also break down when renting may simply make more financial sense than buying a home.
Buying used to be the obvious move
For decades, many Americans viewed buying a home as the no-brainer path to building wealth. Homeownership has long symbolized stability and success, and when monthly mortgage payments were closer to rent, potential buyers would understandably prefer to build equity rather than toss cash into a landlord’s pocket.
Plus, lower mortgage rates also made homebuying possible for more average Americans. And as home values rose, buyers who entered the market early saved money and saw stronger appreciation. But as home prices have outpaced incomes, buying is no longer the obvious choice.
The true cost of homeownership goes far beyond the mortgage
Traditionally, Americans view rent payments as unrecoverable. But homeownership comes with plenty of sunk costs, too, many of which buyers may overlook when comparing rent to a monthly mortgage payment.
Mortgage interest
Perhaps the most glaring unrecoverable cost is the money paid toward mortgage interest. Interest alone can make up the majority of a buyer’s early mortgage payments, and with rates hovering between 6% and 7% in 2026, homeownership has become significantly more expensive from the start.
Property taxes
Rates vary widely by state and county, but property taxes can significantly increase the monthly cost of owning a home. On a $500,000 home, the national average effective property tax rate of 0.9% adds about $375 per month on top of the mortgage, and higher-tax markets can cost far more.
Maintenance and repairs
Whereas renters can call their landlords to handle property maintenance and repairs, homeowners have to shoulder those costs themselves. For example, if a roof leaks or a pipe bursts, the homeowner, not the renter, will bear the full financial burden of the repairs. Older homes, in particular, often entail large, unexpected expenses that can catch first-time buyers off guard.
Homeowners insurance
Due to more frequent natural disasters and recent policy shifts, homeowners’ insurance premiums have risen significantly in many markets nationwide. And if you’re considering buying a home in an area with greater climate risk, such as a wildfire- or flood-prone market, you may face higher premiums, fewer coverage options, or stricter policy requirements.
Closing costs and upfront expenses
The down payment isn’t the only upfront expense of purchasing a home. Buyers also often have to pay closing costs, which typically run 2% to 5% of the purchase price. On a $500,000 home, that range equals about $10,000 to $25,000. Covering these costs, along with the down payment, can greatly reduce homebuyers’ financial flexibility in the near term.
Private Mortgage Insurance (PMI)
As homeownership has become more difficult, many lenders offer low-down-payment programs that allow buyers to obtain mortgages with as little as 3% down, rather than the traditional 20%. However, buyers who put less than 20% down often have to pay for private mortgage insurance (PMI), which can add several hundred dollars to their monthly payment. And unlike homeowners’ insurance, PMI protects the lender, not the homeowner.
HOA fees
Buying a house, condo, or townhome governed by a homeowners’ association can also make monthly costs less predictable. Monthly HOA dues may increase once or twice a year, depending on the HOA’s rules, and some communities also charge special assessments for major repairs, upgrades, or shared expenses in addition to regular fees.
The statistics of buying vs. renting a $500,000 home
Since homeownership comes with additional costs beyond principal and interest, it’s fair to question whether buying or renting makes more financial sense. Here’s how the numbers can break down on a $500,000 home.
The average monthly cost of owning a $500,000 home
The financial reality of homeownership includes many recurring expenses that can add up quickly, strain finances, and potentially affect a buyer’s savings. On a $500,000 home, these costs may include:
- 30-year mortgage payment: $2,528/month based on a 6.5% interest rate and 20% down
- Property taxes: $375/month based on 0.9% average effective U.S. property tax rate
- Maintenance and repairs: $417/month based on 1% of home value annually
- Homeowners insurance: $208/month based on $2,490 annual average premium
- PMI (if applicable): $250/month based on 0.75% of the loan amount annually
- HOA fees (if applicable): $135/month based on median HOA fee
- Average one-time closing costs: $15,000 based on 3% of purchase price
Setting aside the question of building equity, renting may cost less than owning a home in today’s market. Buyers have to cover expenses that renters often avoid, particularly insurance, maintenance, and property taxes. And though building equity is certainly an important factor to consider, these additional costs can make renting the obvious choice in some markets.
Approximate cost of owning a $500,000 home with no PMI or HOA fees: $3,527/month
Approximate cost of owning a $500,000 home with $250 PMI and no HOA fees: $3,777/month
Approximate cost of owning a $500,000 home with $250 PMI and $135 HOA fees: $3,912/month
The average monthly cost of renting a comparable $500,000 home
Since renters don’t have to deal with many of the direct expenses of homeownership, they can set aside more money each month. Those valuable savings can go to investment opportunities, which often offer a higher rate of return than property appreciation, as well as crucial day-to-day needs affected by inflation.
This example estimates monthly rent at roughly 0.5% of the home’s value. On a comparable $500,000 home, that comes out to about $2,500 per month, though the actual rent-to-value ratio will vary by market.
Average cost of renting a $500,000 home: $2,500/month
Renting a $500,000 property saves tenants between $1,000 and $1,400/month
While rent prices will likely rise over the years, renting may still be the better financial decision in some markets. Depending on the local rent-to-buy comparison, renting can lead to monthly savings of up to $1,400. That money can fund investments, repay debts, or create more breathing room in a budget.
What happens when renters invest the difference?
Of course, homeownership is far from the only way to build wealth these days. By investing the money saved from renting, renters may be able to compound their earnings into meaningful gains and build valuable assets outside of traditional home equity.
How investing monthly savings from renting may build wealth over 30 years
There are countless investment opportunities, but for simplicity’s sake, focus on a fund tracking the S&P 500, a widely followed benchmark for the U.S. stock market. While it’s not the only investment option and not a guaranteed outcome, the index has averaged an annual return of 8.3% over the last 30 years.
For ease of math, assume that a renter invests the full $1,200 per month they save by not buying a home in the example above. That’s a big assumption (and not entirely realistic), but if the renter can invest that amount consistently over 30 years, the long-term math is powerful:
Approximate renter investment portfolio after 30 years: $1,900,000
- Math: $1,200/month invested for 30 years at 8.3% returns annually
How homeownership may build wealth over 30 years
Now, compare investments to how homeownership may pay off over time. Eventually, mortgage payments turn debt into home equity, and property appreciation can increase homeowners’ wealth in the long term. Plus, making fixed mortgage payments may become more affordable as income grows over the years.
The home’s potential value was calculated using the average annual appreciation rate for U.S. home values. However, repairs, home upgrades, and selling costs can all impact a homeowner’s bottom line and reduce the amount they earn by appreciation. The exact proceeds also depend on the property’s location and the timing of the sale, among other important factors.
Approximate home value after 30 years (before selling costs), assuming a 6.5% interest rate and no PMI or HOA fees: $1,400,000
- Math: $500,000 home appreciating at 3.5% annually for 30 years
Unpredictable influencing factors
Of course, it’s impossible to predict exactly how the market will change for homeowners and renters over the next 30 years. Factors you can’t be certain of include:
- Appreciation: Home appreciation can shift significantly up or down, especially after major local market changes or climate disasters.
- Interest rates: Economic conditions and Federal Reserve policies can keep mortgage interest rates in flux.
- Refinances: Buyers may be able to refinance their mortgages in a very different future market.
- Investment returns: Depending on investments, returns may vary for better or worse.
- Rent growth: Rent prices tend to rise over time and could one day exceed some mortgage payments.
- Repair costs: The cost of home repairs can also vary with market conditions.
- Property taxes and insurance: As laws and insurance policies evolve, taxes and insurance may increase or decrease.
- Rental property income: The amount of money landlords can earn may change, affecting housing costs.
There are countless other hard-to-predict factors not mentioned here, such as other forms of financial hardship, like job loss or medical bills. Suffice it to say, though, circumstances can and likely will change significantly over the next 30 years. It’s up to each buyer or renter to stay well-informed so they can prepare for whatever comes next.
The honest truth: Most renters will not invest the savings
Realistically, most renters will not be able to invest every dollar they save by renting. Building a $1.9 million portfolio with those savings sounds great in theory, but doing so takes a strong sense of discipline, which can determine whether renting actually helps accumulate wealth.
A phenomenon known as “lifestyle creep” can easily eat up those extra savings. Meanwhile, buying a house forces owners to build equity through their monthly mortgage payments. Renters without the discipline to save and invest for themselves may struggle to build the same kind of wealth as homeowners.
When renting makes financial sense
Renting over buying isn’t for everyone. But it might be the right choice depending on your finances, timeline, and lifestyle. To start, renting can cost much less than owning a comparable home. And if the renter has enough discipline, they can consistently invest their monthly savings to create other avenues of wealth.
You may also want to rent if you need the flexibility for a potential move within the next five years and don’t want to deal with property maintenance. If you’d rather keep more flexibility than take on the long-term costs of ownership, and you don’t have the cash for major repairs, renting might be the better decision.
When buying makes financial sense
When it comes to buying over renting, long-term stability matters. If a buyer has the money to take on repairs and plans to stay put for many years, purchasing a home may make sense. Homebuying can also be a stronger option if ownership costs are comparable to local rent prices.
Buyers should also think about their personal priorities and whether they want more control over their housing, even with the added financial responsibility. If they have the means to buy a home without stretching their budget too thin and the local housing market has strong appreciation potential, buying may make more financial sense.
Renting vs. buying is no longer a simple decision
Homeownership is far from the default milestone it once was, a change that’s affected both home purchases and the rental industry. As higher costs have thrown traditional homebuying plans off course, many Americans are reconsidering whether renting gives them more short-term financial flexibility. However, even with elevated interest rates, homebuying can still build wealth under the right conditions.
If you want to invest in real estate, consider whether buying a house specifically to rent it out makes sense for your goals. Ask yourself questions like how long you plan to own the property, whether you can handle the expenses, and how you’d use rental income to determine whether becoming a landlord is right for you.
As you answer those questions, look closely at your local housing market and compare the amount you could realistically earn against homeownership costs before making your decision. With the right numbers, preparation, and know-how, becoming a landlord can help you capitalize on rental demand and achieve a strong return on investment.
This story was produced by TurboTenant and reviewed and distributed by Stacker.
