money·4 min read

Is Renting a Waste of Money?

renting waste of money money rule to break
Design: theSkimm | Photo: iStock
Apr 15, 2022

Quick answer: No, renting is not a waste of money. And not just because it puts a roof over your head.

Owning a home might be part of the classic American Dream. But it's not without a number of (expensive) drawbacks. And with the tight housing market, home prices up 19% since last year, and mortgage rates hitting 5% for the first time in over a decade, buying a home has become increasingly difficult. 

So even as rental costs across the country are up an average 22% from last year, renting may still be the best move for you. 

Why does renting get such a bad rep?

Because each month's rent counts as a hit to your budget. You pay a sum of money to your landlord. In return, you get a place to live. And the transaction ends there.

On the other hand, when you own your home, each monthly mortgage payment goes toward building equity in your property (which is likely the largest and most expensive thing you'll ever own) and your net worth. So it's more like an investment than a cost. And it can be a lucrative one, which is why some people get into real estate investing, not just buying for their primary residence. 

Sounds like renting is a bummer.

Don’t worry. It has its perks. Like freedom and flexibility. Wanna move every time your lease ends? Go for it. Rather stay put for a while? Renew that lease.

Renting also frees you from having to worry too much about maintenance. Read: When the ceiling leaks in your rental, you get to call someone else to come deal. And foot the bill. (But renter’s insurance is a good idea to protect the things you do own.)

Another perk: lower upfront costs. You typically need to put down a security deposit (usually a month's rent), plus the first month’s rent. That's likely to be less than what it takes to buy a home. PSA: Experts recommend having 20% of the purchase price for a down payment on a home (but more or less could work, too).

Okay, I like the sound of that. But what about my net worth?

Homeownership isn’t always a good investment (see: 2008's housing crash). And even if it is, it’s not the most liquid. Meaning if you want to cash in on your investment, you have to jump through all the hoops of selling your home (and find a new place to live).

Renting can make your money more flexible. Example: If your rent is less than what you'd be paying in monthly homeownership costs, consider investing the difference. So if a mortgage would cost $1,500 per month, but you rent for $1,000 per month, stick that extra $500 in a high-yield savings account or another liquid investment account to grow your net worth while renting.

So should I avoid buying a home?

Only until you’re ready. Owning does have its pros, on top of being a potential wealth builder. Like tax breaks. And nobody telling you whether you can have a pet or paint your room purple. Aaand no landlord suddenly raising your rent.

But as tempting as it might be to join the home buying crowd (hi, FOMO) and try catching mortgage rates before they rise even higher, you don't want to rush into homeownership. Buying a home is no easy feat and maintaining it is a huge commitment for you and your budget. And doing it before you can truly afford it might be worse for your long-term financial wellbeing.

So whether you want to keep renting until your money and heart are ready to buy, or you simply need (or prefer) to rent, know you’re not throwing money away. 


If you're chasing the classic American Dream, buying a home (with or without the white picket fence) might be high on your goals list. But renting isn't the nightmare money-waster you may have heard that it is. It can offer flexibility and freedom — and a roof over your head — that might make more sense for you and your budget.

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