Is Renting a Home Really a Waste of Money? Experts Weigh In

Every Monday on the Money Confidential podcast, host Stefanie O'Connell Rodriguez, a nationally recognized money expert, delves into your (confidential) money problems and delivers smart, practical, and completely doable solutions that will help you work toward your ultimate financial goals. This is the place to come for real talk about money—and real solutions that actually work.

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On This Episode

One of the big milestones of adulting tends to be buying a house. And that may be because renting is often seen as throwing away money. But is that really the case? On this week's Money Confidential, host Stefanie O'Connell Rodriguez hopes to answer that question.

Meet Our Caller

Cheryl (not her real name) is a 35-year-old living in Los Angeles who had a bad experience owning her first home and is considering never following that path again.

"Everyone in my life is like, you have to own a house," she says. "I did it, and I hated it. There was just this never-ending cycle of every weekend, there's something to do to maintain this house."

So Cheryl wondered if she should listen to the hype about home ownership—or keep on renting. "Is it actually more fiscally responsible to rent, and to not have to worry about your boiler breaking, and to not have to worry about the roof? And to have a big pile of savings, and go on vacations, and live your life, and do all that."

Advice From the Episode

O'Connell Rodriguez turned to financial expert Shang from SaveMyCents.com for advice on the rent vs. buy dilemma. And Shang also felt some buyer's remorse from her first home purchase in Boston. "My parents impressed upon me that renting was throwing my money away and that I should get into real estate as soon as I could," she says. "It ended up not being the right decision. I left Boston only after a few years. There was no need for me to even own, and it was too much house for me."

Consider the Perks of Renting

Many times, new homeowners don't understand the full financial picture of homeownership—including the very slow build-up of home equity and the additional expenses of home repairs and maintenance, HOA fees, and property taxes. "As a renter, you actually got it really good—any problem that you got, you call up your landlord and they basically have to come fix it at some point," Shang says.

Ask Yourself What You Value

Shang recommends determining what you value in life and what success looks like to you—not what your parents or friends think. "If you haven't taken the time to reflect on your values and what it is that you really want out of life, it's then really easy to let others define what that success needs to look like for us," she says.

Home ownership makes the most sense if you can commit to a neighborhood and a job for several years, if the housing market is on the rise there, and if you can factor in the additional costs—and the fact that your money will be tied up there and not in other investments that'll give you a better return—and it still makes more sense than renting.

Calculate if the Investment Is Worth It

"The return in the stock market on an investment has averaged at about 10 percent year over year," Shang says. "According to Zillow, the average annual growth in home prices has been 4 percent a year. If I'm talking to an average person who's considering putting money into the stock market versus trying to build equity slowly into a home, I just look at those two numbers and I say that doesn't match up. You're actually throwing away more money by buying that house."

Transcript and Links

To get the full story on renting vs. buying (especially in the current housing market), check out the Money Confidential podcast "Is renting really throwing away money?" on Apple podcasts, Amazon, Spotify, Player FM, Stitcher, and wherever you catch your favorite podcasts.

Get the full transcript of this Money Confidential podcast here.