4 Reasons Renting & Investing Beats Buying & Owning, Hands Down

by | BiggerPockets.com

G’day, everyone.

On a daily basis, I speak to people who are caught up in living the “American Dream.” The story line goes something like this:

  1. Finish college
  2. Find a well paying 9-5 job
  3. Get married
  4. Buy a highly leveraged house
  5. Have kids
  6. Find a better paying 9-5 job
  7. Up-size to a bigger house and bigger mortgage
  8. Send kids to college
  9. Down-size to a smaller property
  10. Hopefully live and enjoy life for another 20 years without having a mortgage forcing you to get out bed every morning

Does this sound like you and your future plans?

In today’s article I would like to challenge the above status quo.

Let’s get started.

Food, clothing and shelter are the three basic requirements of human beings. After food and clothing have been looked after, most of you start looking for a house to call your own. There’s no question that buying a house makes sense for some people, but it’s certainly not for everyone. Owning a house gives you stability. That’s what people say, at least.

So, when you’re looking for a place to live, a lot of people will tell you about the many reasons why you should buy your own house. However, some people would say that home ownership as a path to wealth generation is nothing but a marketing ploy of the real estate industry. And they do have a pretty good case. With that thought in mind, renting habits have changed in the last few years, as many people consider this as a viable option. Financially speaking, owning a house is not always the best bet. I’d go even further and tell you that if you’re looking to make money, buying a house to live in is a terrible waste.

Let’s look at the 4 best reasons about why renting is better than owning a property.

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4 Reasons Renting & Investing Beats Buying & Owning, Hands Down

1. You don’t have to get a mortgage.

This one is the most obvious one, but often misunderstood. Although some people are able to just buy a property with savings they have ready to spend, for most, a mortgage is considered as the only way to buy a home. Most people don’t have all that money just laying around, and getting a mortgage is the best way to attain it. So, even when a property is more than what the buyer has in his bank account, they can still spend it on a home of their own. It’s easy to think of a mortgage as a safe option to consider since it gives people the ability to spread that huge cost over a period of say, 25 years.

And that makes it easy, right? All you have to do is make a monthly payment and pay the bank a little extra on top of the original cost and you’re done.

That small percentage you have to pay in addition to the original sum adds up to a pretty huge amount over this long period in spite of a mortgage interest deduction. Taking the interest into account, and it’s easy to have payed twice the amount of the original purchase after 25 years. But all that is pretty well understood. There’s one thing that’s always forgotten, though. A mortgage is a debt.

So what? You’re making your monthly payments, and they’re possibly even lower than what you would be paying for rent. But rent is an expense and not a debt. And that’s the one thing that makes all the difference. Buying a house against a mortgage will only increase the debt to the income ratio you already have. This has one major consequence: If you need to borrow money for other essential things like, say, a study loan or a car loan, you’ll find it way harder to get one.

Related: Debunking the Buying a House is a Bad Idea Myth

This means that all that money you had access to for your home is just sitting there and costing you more money. There’s nothing you can do with that money, and you definitely can’t use it to invest and earn more money. Owning a home will usually cost you more per month than renting anyway. To this day, I still rent and use all of my personal funds for investment purposes. I like to joke around by calling my personal funds “little soldiers.” They are always out fighting and making me more money instead of being stuck in a bunker (mortgage) and not able to move anywhere.

2. People borrow more than they can afford.

When you’re out to buy something, you simply look at the price attached to it and depending on how much you can spend, you’ll buy it or you won’t. What you can spend in this case is usually whatever you have in your wallet or on your bank account. However, when you’re getting ready to buy your own house, things change. By getting a mortgage, a slight increase in monthly cost can get you a tremendous increase in budget. It’s easy to go too far and get lured into paying more than what you should.

Many folks who are associated with getting you across the line with purchasing a property, like your real estate agent and mortgage broker, can play on your emotions and get you to commit to something that you really shouldn’t. And in any case, you think it’s a good investment, right? Well, reality presents a different picture. Currently more than 10 million homeowners in the US are under mortgages worth more than the actual values of their houses. And they continue repaying these mortgages for years and years. I’m guessing these people no longer think they made a good investment.

With renting, you know what you’ll be paying next month, and you don’t have to worry about paying too much for a property. If for whatever reason you can’t afford to pay the rent anymore, you can find another property with cheaper rent as soon as your lease is up. Another benefit is that the lease is fixed as long as the lease is still active, and if a landlord decides to increase the rent, they’ll have to give you notice. So, no surprises and no headaches.

3. You’re no longer mobile.

With globalization, people have become more mobile. But even when you’re not leaving the country, people shift jobs a lot more than in the past. This is even more the case for the latest generation that has hit the workforce. With all these people switching jobs comes a whole lot of relocating. Many people choose a specific area simply because of how close it is to either the workplace or to the children’s school. If you’re one of those people, it makes a lot of sense to remain flexible with where you live. If you buy a home, that mobility is gone.

This is certainly not the case when you rent. You’re almost as mobile as you want and that has its advantages, probably more so for the younger generations. When you want to make the most out of your life, you need to be able to seize every opportunity you can. When you’re tied down to a home you own, you’ll have to pass on a lot of possibilities. When you’re renting, a whole world of opportunities just lies there for the taking. Look at me, for example. I packed my bags and left Sydney, Australia to move to Kansas City. All this happened within two weeks after making a few minor arrangements.

Related: Are Extra Mortgage Payments Worth It? A Look at the Numbers

4. Houses have operating costs and maintenance.

While the value of a house increases over a certain time period, the life of the equipment present in the house does not. Since properties are valuable assets, the owners try their best to keep their houses well-maintained. That means that owners will spend money on repair, modification, redecoration or annual common service fees in order to keep that property value up. The cost of ownership is usually something that is overlooked, but it adds up to a considerable sum. A leaky roof, frozen pipes, a pool to take care of or just simple home improvements are some of the expenses that are always on the homeowner’s mind. Apart from this, owners also have to pay annual property taxes and a variety of other miscellaneous expenses.

Now, don’t forget that if you become a landlord and put your little soldiers (money) to good use, you will still get hit with all kinds of expenses, but in this scenario, the properties you own will be tenanted and should be producing large sums of cash flow. In return, paying for expenses shouldn’t have a direct effect on you, as they will be covered by the rent you have received from your tenants.

Despite all this, it is still very common for people to push you to buy instead of rent. Here’s a good way of looking at it. If you’re planning to stay where you are right now and if you’re not looking for financial growth and more freedom, then buying a house might be for you. Everyone else should really reconsider—because owning a home might be costing you way more than your monthly mortgage payment.

And don’t forget about those little green soldiers marching and fighting day and night for you.

We’re republishing this article to help out our newer readers.

Do you agree or disagree? Why?

Leave a comment and let’s discuss!

About Author

Engelo Rumora

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.


  1. Julian Starks

    Nice article, however here in the DC area rent costs are quite astronomical as opposed to paying a monthly mortgage. Rent for a two bedroom apartment in DC, Maryland, and Virginia ranges between $1,500 to $2,200 depending on the area, my mortgage for my 3 bedroom house with 2 full baths and 1 half bath is much cheaper. So perhaps in some instances it may be better to rent but in my opinion owning your own home is a great ‘gateway’ investment.

    • Engelo Rumora

      Thanks for your comment Julian,

      Every market is different so as investors we have to evaluate what strategy suits us best.

      I never stress that I’m right or wrong.

      I just like sharing my opinion 🙂

      Thanks and have a great weekend.

  2. That is fine if your investments will be something other than housing. I seriously doubt there are huge numbers of real estate investors out there that successfully invest in rentals or flip homes, but have been unable to justify pulling the trigger and buying a home to live in.

    Once you have bought and been a homeowner, I would also venture to say most people would not voluntarily decide to go back to being renters, with the possible exclusion of those in big cities or in retirement.

    • Engelo Rumora

      Thanks Steve,

      Personally I have found it much more profitable to rent and invest my funds rather than to get into debt and own.

      I don’t need the “security” of home ownership.

      Once I have enough cash sitting in my account I will go out and buy my dream property with cash. As long as this purchase doesn’t affect my future buying power, we should be all good hehe


    • Avi M.

      You’d be surprised, Steve. I’ve been a homeowner multiple times. Like Engelo says, if you want mobility, home ownership really doesn’t make much sense. I’m perfectly fine giving up the responsibilities of ownership — I don’t miss that aspect of it at all. I’ve made money on all the homes I’ve bought and sold, but being able to move around at a whim is HUGE. To each its own … maybe I’m the exclusion to the rule, but I think in general there’s a push in this direction, especially for us DINKs. 😉

      • I have lived in 13 locations in the last 25 years. I have owned and rented. Overall, my bottom line improved more when I owned. I may decide to rent again in retirement, I don’t know yet, but I do know that the decision to rent willl be based purely on convenience and not because I believe it is economically superior. Even then, I will have multiple renters paying my bills…and I will probably still decide to own at least one home to come back to on occasion.

  3. James Wise

    Sorry Engelo, I am going to have to disagree with the premise of your article.

    Nationally homeowners have had a net worth of 31 to 46 times that of renters over the last 15 years.
    (Source: Federal reserve survey of consumer finances)

    Here are some other reasons why I disagree with the notion that renting is a better financial play than home ownership.

    1. When you own a home, part of that monthly payment is going into your pocket in the form of equity.

    2. You have more control of your life if you own a home. A rented home is still the landlord’s home. Not your own. If things change in the landlord’s life and he/she decides they need you out of there a 30 day notice is not a lot of time for an entire family to uproot themselves.

    3. You get to decide what changes you want to make to the home. Want a pool? Want to refinish the floors? Want to build a deck? Want an additional bathroom? Want to finish the basement? All of these decisions are out of the renters control.

    4. If you bought a home with a traditional mortgage and you lived there paying on that mortgage for 30 years you now have a free and clear asset, no more monthly payment, and a pile of equity. If you rented the same home for 30 years what do you have to show for it? Nothing.

    5. Rental increases are out of your control.

    6. Mortgage interest is a tax deduction.

    7. Interest on a mortgage is lower than the interest on most other types of loans.


    Even though we are on opposite sides of the fence on this topic, you are still my favorite real estate dingo.

    • Engelo Rumora

      Hi James,

      Thanks for your comment and raising some great points.

      Many of the things you mention hint to “living a comfortable lifestyle” that is “low risk”.

      The points you stressed would better suit someone that might be more established and that is looking to settle down.

      Someone like myself for example that has come to this beautiful country to build a better life for his loved ones and himself is out to hustle and make S#$% happen.

      “Comfort” is a word that currently doesn’t exist in my vocabulary.

      “Sacrifice” on the other hand is stamped in there haha

      I would love to meet you in person and see what you guys are doing as we look up to your success in Cleveland.

      Thanks Dingo James and I’m the only Real Estate Dingo out there tho. I wish you would have said that I’m your favorite Aussie haha

      Have a great weekend mate and send me an email sometime [email protected]

  4. Stephen S.

    To start off with – I guess I have the classic Realtor Argument that paying rent is gaining you nothing – whereas even a badly screwed LTV is gaining you at least something. That is; you are putting out All the rent – but you are only putting out the interest portion of a mortgage payment.

    You have made me think about it more just now and as a result I now think that instead I would suggest doing a combination of both. Maybe buy a duplex or triplex, or a house with a MIL Suite, or maybe some extra bedrooms (to do a House Share) and so both buy yourself a place to live And make it pay it’s own way. Just the pure renting a place to live doesn’t appeal to me in the same way that it apparently does to you. Something about it just ‘feels bad’ to me. Maybe someone who is not as lazy as I am can work out all the numbers on each and so make an accurate calculated response comparison?

    • Engelo Rumora

      Thanks Steven,

      I played with the idea of buying a duplex and living in one side and renting out the other.

      This structure IMO would have given me a bit more security just in case the landlord wanted to sell or raise rents like James mentioned above.

      I do believe what you mention would work well but as I mentioned in my blog, I love my little soldiers fighting for me.

      I play a very low cash on hand and high investment game so I want every penny out of my pocket and working.

      Tying up funds for too long in any transaction is a “No Deal” for me.

      I am looking forward to settling down one day and genuinely buying a place to call my own.

      It would still consist of buying it unencumbered without the burden of a mortgage.

      Thanks again for your comment and have a great weekend.

      ps. I did crunch the numbers a while back and it actually made more financial sense to rent vs own as long as you didn’t include any appreciation in the projections and as long as you could get a good enough ROI. Maybe someone not be as lazy as us and show the figures??? haha

  5. Eric Robinson

    Great article Engelo! I just recently did this specifically for some of the reasons you mention. I sold my 3 bedroom house and moved into an apartment – freeing up about $1500 per month in mortgage, taxes, and utilities costs that I can now use for investing. Plus I freed up the VA loan I had on the house for a future no money down rental property purchase (duplex, triplex, or 4plex). Once I got past the emotional ties to the house and looked at it logically, it made a lot of sense for me. My kids had grown and now had their own places, so the expenses and work of maintaining the house became harder to justify. But I can understand some of the other arguments against it. It depends on your individual situation. Friends and family thought I was crazy, but I believe it was the smartest decision I could have made at this point in my life. It really has simplified my life tremendously and allows me to invest more.

    • Engelo Rumora

      Thanks Eric and awesome stuff mate,

      Yes and Yes,

      It just comes down to the individuals circumstances and where they are in life.

      To me, renting makes more financial sense as I know the game of real estate and can make more money as long as I have liquid cash to invest. If a good deal presents itself – BOOM, I buy it instantly and can turn it over in 4-6 weeks and make $20,000 profit.

      Plus, one day I want to go back home to Australia so renting is more feasible.

      Also, they say that if “CASH is King than CASHFLOW must be Queen” lol

      Well done and don’t get caught up in the noise of what others are saying.

      When I moved to the US, folks from Australia called me “crazy”. Now they beg me for advice.

      Just keep galloping and the dust(crappy S#$% talking people) will eventually settle.

      Thanks and have a great day.

    • Kenneth Sok

      I’ve done something a little similar.

      I have a townhouse that I bought and am paying about $2K PITI.

      I decided to relocate my family and we are now in an awesome apartment complex and only paying about $1K a month in rent while renting out my townhouse. Now, I am building equity with my rental house and am paying a smaller payment each month. It’s a weird reverse house-hacking kind of style but it’s working so far! I am still looking for that next multi-family though to get into and house hack the more “traditional” way if you want to call it that.

  6. Jerry Kisasonak

    This is one of those “It depends” subjects. For someone starting a family I think renting is a terrible idea. For someone single or empty-nesters renting may be a good idea. It’s relative.

    But to say “They (my dollars) are always out fighting and making me more money instead of being stuck in a bunker (mortgage) and not able to move anywhere” is silly. If you get an FHA loan and put 3% down you hardly have any of your own dollars in the deal. That’s the power of leverage in real estate.

    Personally, I love how my brother recently restructured his financial life. He was renting and went out and bought two single-family rental properties – both which cashflow around $400/mo. He then when out and bought a home for himself, a home that has a mortgage payment that is 100% paid for with his rental income. Today he has no more rent payments, his personal mortgage payments are covered by his rental income AND he has all the wonderful benefits of homeownership. He is now looking forward to his next rental property purchase.

    • Engelo Rumora

      Thanks for your comment Jerry,

      I played the leverage game when I first started and it consisted of maxing out a refi on ever purchase I made.

      I bought 10 properties in 6 months and had over $1m in debt. This almost cost me my A$$ as the market didn’t go up in the value soon enough. I liquidated quick enough only loosing little money.

      I’m sure many folks can still remember what leverage did to them here in the US back in 2008.

      I now do everything with cash. From personal investments to the companies. I also intend to keep using cash and building a strong foundation for my business and personal investment with cash only for as long as possible and no matter how slow it goes.

      This is great security if the market takes a nose dive as I won’t be forced to sell and will easily be able to ride out the wave.

      Just my strategy and something that has been based on my previous experiences.

      Thanks and have a great day.

      • Hassan Hamdifi on

        Thank you Angelo
        I am a happy renter as well and part time owner. My first house was my dream house which turned into a nightmare after the 2008 crash and had to foreclose on it. That was my wake up call and decided to never get a mortgage. I went old school and started saving and buying cash because someone told me ” Cash is King”. I bought a fixer upper live in it and fix it at the same time. Then sell it for a good profit when you do most of the work yourself. I am buying 2 houses for the price of the one that I sold and at the same time renting the house where we live with all the amenities we need including a pool which we enjoy after a long day of work. My plan is just use Cash. My approach is buy a house cash fix it sell it and with that money buy 2 houses fix them and rent one and sell the other and buy 2 more houses and keep duplicating. It will take some time but in the long run you can retire comfortably without worrying about mortgage, or highs and low of the market. I know it is a slow process but very profitable.
        Thank you and have a great day.

        • Engelo Rumora

          Thanks Hassan,

          Your strategy is very similar to mine.

          I intend on using cash for as long as possible. I have a business partner that has a portfolio worth $10+ million and he now does 150 flips per year. He has built this empire with all CASH and is also not a fan of leverage.

          All good things take time and folks that are are rushing and using high leverage are playing a risky game in my opinion.

          Thanks and keep the dream alive mate

      • Jerry Kisasonak

        Hi Engelo. Thanks for the reply. You said: “I bought 10 properties in 6 months and had over $1m in debt. This almost cost me my A$$ as the market didn’t go up in the value soon enough.”

        That sounds a lot like you were speculating – which in my opinion is a whole different thing than investing. I’ve been investing since 2001 and I certainly remember the crash of 2008. The properties we owned cashflowed when we bought them and cashflowed when the market crashed. We really felt no change whatsoever, except for the fact that rents starting creeping up because homeowners were entering the renter pool. It was good news. Also, we were able to find more deals, another plus. I really would like to see another crash. The sooner the better.

        Your attitude reminds me alot of Dave Ramsey’s. He did the something similar to you, and instead of admitting he made some poor business decisions he blamed the downfall on real estate debt. He got burned on a pot while cooking dinner and swore off cooking for the rest of his life – figuratively speaking of course. Now he makes millions teaching others how to swear off cooking with hot pots. I wouldn’t suggest this. Best to learn solid cooking techniques and make a nice dinner for you and loved ones.

        We are investors. Investors should care about one thing: returns. Your return on investment by paying cash for everything is lackluster, and frankly there’s better businesses to consider than real estate if leverage is taboo. Just my opinion.

        Thanks Engelo

        • Engelo Rumora

          Thanks Jerry,

          Your comment is much appreciated.

          There are many ways to make money in real estate using many different strategies.

          I’m just sharing my experience without stressing that its right.

          So far it has been a very successful for my company and myself enabling us to get to the level we are at today.

          Much success with your endeavors.

  7. Leann W.

    Call me crazy, but if you’re dropping upwards of 1500-2k in RENT… all I can think is- WHY? If you’re a young upwardly mobile person who wants to be free- ok I get it. But seriously, over the long haul- to me its not the best way to go. Id rather build equity than just give it away. To the other point about buying more house than you need… or can reasonably take care of, I’d say that’s on point. Too many people get caught up in the “I gotta have this or that” in order to be happy in a home. Trouble waiting to happen. IMHO.

    • Engelo Rumora

      Thanks Leann,

      Here in Toledo we can get a very nice 1,600 sq ft – 4 bed, 2 bath home with a double garage on a 6,000 sq ft lot close to shops and amenities and a hospital for around $1,000 per month lol.

      Big difference compared to anywhere else in the country.

      Have a great day.

      • Christopher Moran

        It is the same where I live in Pueblo, Colorado. $1,000 per month in rent will get you that same home.

        Or, if you shop around, you can buy that same home for $60,000. If you borrowed $60,000 at 4% to buy this home, you would have per month housing expenses of:

        $200 interest expense
        $200 maintenance & capex reserve
        $ 50 property taxes
        $ 40 insurance

        $490 per month expense

        So, to live in the exact same home will cost roughly $1,000 per month if you rent, or roughly $500 per month if you buy.

        Want to move? Fine. Move and rent the place out.

  8. Nathan P.

    As a Kiwi it pains me to say that I agree with the Aussie 😉

    I think it can make sense to rent, depending on your market and personal situation.

    Where I live a house that costs $2500 a month to rent can cost a million dollars to buy. I can invest the difference between rent and ownership costs to make more than I would in equity from the mortgage being paid down and appreciation.

    I have no emotional attachment to owning my personal residence. It doesn’t stop me from enjoying my home. I also like that as a renter it is easier and cheaper to move when I want to. For now, at least, renting is the best option for me.

  9. Jerry W.

    Hey Engelo,
    I am going to disagree with you on this one. First James pointed out all the money incentives. You seem concerned about your mobility and your debt to income ratio. The trick is to buy a house that the payment plus taxes and insurance is less than your rent payment.. now if you want to move what do you do? How do you keep from being tied down? Oh there is a website called BiggerPockets that can help you learn to rent it. If you did a decent job of buying it and have low monthly payments you might even make money. While you worry about your little soldiers making you money, you would spend less money down buying a residence than getting a commercial loan to buy a rental. If buying a rental makes you money how could buying a home not be a wise business decision? You just need to use the same wisdom in picking a home and getting a good loan rate. You could move after a year of living in it, and a lease is usually for a year also. With rent you recapture none of that money after renting your entire lifetime. All your soldiers died and and accomplished nothing. With owning a home you might pay off 2 or 3 homes over your lifetime. Plus when you sell your home someday there are no capital gains if it was your primary home for 2 out of the last 5 years. If you bought right, added a few nice features like updating the kitchen and bathroom, new paint and carpet, you might may a decent profit. Good day bud.

  10. morris lucas

    Being of victim of the crash, high extremely leveraged mortgages scare me, they are great until something goes wrong. Not to mention these days, folks are going to pay darn near 3X what the home is worth if you carry out the full loan.
    I think buying is still a good investment if you can totally disavow all emotional attachments to the buying process…basically looking for your “dream home” in a beautiful, sought-after neighborhood with all the un-neccesary add-ons and not crunching the numbers in case there is any life or employment change.
    Basically like the previous poster said, buy the home with the same scrutiny you would a rental, and i think it still makes sense to own. Just my opinion.

    • Engelo Rumora

      Thanks for your comment Morris and some good points raised.

      We are looking to buy our “dream” property soon. I have been involved in over 300 deals in the last 4 years and have never bought any of them based on emotion.

      Every decision is purely numbers based.

      I’ll probably do the same with the “dream” property just nobody tell Dominique please haha

      Have a great day.

  11. Engelo,

    I think you are talking out of two sides here. You mention that as a renter you are not paying for repairs, taxes, etc. and your little green soldiers can go fight for you. But then you mention that as a landlord, you don’t have to shoulder these costs, you pass them on to your renter.

    I think as a renter, your little green soldiers ARE infact paying for repairs, taxes, etc. I know my renters’ soldiers are -for me of course:)

    As home owners, we are our first renters, maybe our best renters. I do understand the flexibility issue. For me, if I had to move around every few years, I would just keep buying and leaving renters in place as I move on. The rates are best when originally borrowing as owner occupied.

  12. Brandon Stevens

    To each his own, many people have no reason to buy but they do anyways because “they think its the right thing to do” they dont buy right, they dont live their long enough, they don’t add value when they sell in 5 years for little more than they bought it for they lose money of they are honest with themselves. If they were disciplined enought to put the money they spent maintaning the home into some other investment vehicle during that tim’e they’d probably have been better off renting.

    I agree with the article to a certain extent if you are the average person who knows nothing about real estimate and isnt staying in a home for at least 10 years. But for all of us on here, RE is our vehicle and we treat it as such so we get the most out of every property, rental or primary.

    What is comes down to is your could easily manipulate the numbers both ways to argue both sides.

    • Engelo Rumora

      Thanks for your comment Brandon,

      Looks like I will need to come up with more “controversial” blogs so I can always get this much traffic lollol

      Your statement here is bliss “What it comes down to is your could easily manipulate the numbers both ways to argue both sides.”

      100% agreed.

      As I mentioned above, there are many different ways to make money and do well in real estate. It will just come down to what someone’s comfort levels are and what suits their end goals best.

      Let the debate continue…

      Thanks and have a great day.

  13. Jerome Kaidor

    Yet another “disagree”. And I speak from experience. I bought my first house in 1980. At that time, houses in the SF bay area were more expensive than ever in history – we had just come through the inflationary 70’s. And interest rates were through the roof too – our first mortgage was FIFTEEN AND A HALF PERCENT. Through that first decade, the value of the house went up… and up… around the mid-nineties I paid off that mortgage. And that house taught us a lot. We built a 460-foot addition with permits, and learned about foundations, framing, plumbing, electrical… Did most of the work ourselves.

    Sold that house for a large profit, bought a nicer one in a better neighborhood. Bought a rental fourplex. Refinanced the fourplex and bought an 8-plex. Refinanced the fourplex again, refinanced the house, and bought a 52-unit complex.

    We now own 81 units, about to close on 13 more. I haven’t worked a 9-5 job in 12 years! But it all started with that first modest house. So for us, buying a house was an excellent investment.

    • Engelo Rumora

      Thanks for your comment Jerome,

      Well done on your success.

      The market in Sydney has also doubled in value as of recent and I have many fellow investors back home now calling themselves millionaires.

      I believe this was the case here in the US before the bottom fell out. Many folks were getting into huge mortgages and hoping for appreciation.

      Bad idea IMO.

      Nowadays, I base my investing on the numbers in deal and not speculation of appreciation like I did before.

      Thanks again and have a great day.

      • Jerome Kaidor

        Agree. When I bought that first house, I had no thought about appreciation. We just needed someplace to live. We had been renting an apartment in a small complex on the SF peninsula. Two things happened to turn our thoughts toward owning:
        * Somebody slashed the tires of my bicycle, which was chained in the laundry room.
        * Landlord sent us a letter with a 20% rent increase.

        So for a year or so, we didn’t see any movies, didn’t eat in any restaurants, bicycled to work, saved up that down payment.

        Like you, I don’t worry about appreciation. I buy for cash flow from rents. If the deal doesn’t make sense from that perspective, I pass. This has kept me from doing stupid things.

        • Engelo Rumora

          Thanks Jerome,

          You must have pissed someone off so they slashed your tires lol

          Me being the rude and raw Aussie that I am, I’m yet to find my car tires slashed haha.

          Have a great day.

  14. Javier Marchena

    Hi Engelo,
    I understand your point about the cost of owing a home and the cost of a mortgage. But I think there is some value in owing a home.
    “Getting up every morning” because you know you have to pay your mortgage or your rent is not much different. If you do not pay any of those you loose your house.

    It is true that people borrow more than they should when they buy a house. They do so when rent a house too.

    “You are not longer mobile” For us, RE investors this can be an opportunity. You can buy your house to live there and after a few years when you decide to move, just find a renter that pays for the mortgage and add this house to your portfolio. Next…!

    Cost of maintenance… I can’t argue against that. Unless you get a bad landlord…

    • Engelo Rumora

      Thanks for your comment Javier and point of view.

      I would rather invest in rentals and not have to worry about getting out of bed at all to pay my rent lol

      Passive income and cashflow is the name of the game.

      These days I can easily get a 20% net ROI with lower risk investments.

      Just my opinion mate.

      Thanks again and have a great day.

  15. Colin Smith

    I too would have to disagree. I believe that interest, taxes, insurance, and maintenance costs are less than what it would cost to rent. Then if you add value to the property that can certainly offset those costs. Appreciation can do the same. Now I would agree with the mobility aspect. If you don’t plan to stay in an area for less than two years, it may be better to rent because of the costs associated with buying and selling a property.

    • Javier Marchena

      That video is based on assumptions that don’t make sense. A $1M house does not rent for $3000/month. Nowhere you will find a CD that pays 4% annual. If you start with the wrong assumptions, you will get bad results.

      I will recommend people put all their numbers in black and white to decide if they are better off renting vs owning. Depending your market, your financial condition, etc. Write everything down and see what is your best bet.

      • Jerome Kaidor

        Depends on the market. Here in the SF east bay, a $900K house rents for
        $3.5K a month. In San Francisco itself, the rents are completely insane – $5K a month for a 2-bedroom apartment! This is in spite of some of the most strict rent controls in the country. Single family houses in SF might be a good bet – because they are exempt from rent control by the state of California “Costa Hawkins” law.

    • Engelo Rumora

      Thanks for sharing Gianni,

      My partners and myself can do wonders with $250,000 cash.

      I would never want to tie up such a sum for more than 120 days.

      Once again, this is just based on my experience and strategy as I know what I can do with that money and how many times I could turn it over.

      Each to their own I guess.

      I too will one day buy and own my very own “dream” property. But it wont be mortgaged.

      I will only buy it when my cash reserves allow me to do so.

      As I mentioned in one of the comments above, I have a mentor who is worth $10+ million dollars and still does every deal with cash.

      Runs 3 companies with personal cash.

      Its the slower path to wealth but more sustainable IMO.

      Thanks and have a great day.

  16. The decision to “buy” or “rent” depends on the market and your short and long term goals. I live in Hawaii, and it’s a lot cheaper to buy than to rent. A 300 sq. ft. studio rents for $1,400/mo+. For $1,400/mo you can purchase a 2 bedroom apt. for $300,000. I love renters though, because they help me pay my mortgages and build equity on my properties.

  17. Jerome Kaidor

    I’ve seen a few comments in this thread that “in market XX you can buy for XX dollars a month, but rent for a similar house is YY dollars a month, where YY is about twice XX. Those sound like good areas to invest in.

    Here in the SF bay area, the numbers for single family houses have NEVER worked for me, with the possible exception of the 2008 foreclosure boom.

  18. Brenda A.

    Thank you for this brilliant article, Engelo! I am studying furiously right now to become a real estate investor and I will continue to rent while making money investing in real estate . Finally someone in the investing and real estate world agrees with me! I am a newbie to real estate investing who grew up with my father teaching us about the American dream and home ownership and investing our money in property and land. There were five of us kids and our parents who owned our home in New Orleans, LA. Only 1 of us paid attention to what he said and bought property and time shares and land. The rest of us are just now realizing that we should have taken his advice at least about investing in property and land. However I think like a millennial. I don’t think owning a house is necessarily the best thing to do because it costs too much to maintain! I do think we’re better off renting a residence and investing in buying real estate to rent to other people to make money! Or investing in real estate for passive income with notes and things like that. I do believe that buying duplexes and four-plexes is the next best way to go if you feel must live in something you own. Thanks again for

    • Matt Crusinberry

      I agree with you 100%… I think I’m going to move my family into my parents house, this gives me even more money to invest. Why try and house hack when I can just use everything for another rental and rent out all 4 units. If my family won’t have me, I’ll check out the locations that allow me to rent below section 8 (riskier living conditions, but better for the wallet). This also allows for all my “little troops” to work for me. Great article!

  19. Bojan Kovacevic

    Excellent article Engelo! Thanks for this. Now to only convince my fiancee of the same, hehe. I find a lot of people getting sucked into this mentality of “I’m a home owner” and that renting is “second class” in a way. At least in my experience I find this to be the case. But the fact is you can be both, a renter and a home owner. A renter for your primary residence and a home owner for your real estate investments. People always wisely say “you need to make your money work for you”, well what you’ve laid out here is exactly doing that. And we shouldn’t get blind-sided by the emotionally need to “own” our own home. Especially since you don’t really own your own home for 25 years. All you own is a mortgage.

  20. Timothy Trewin

    I think these are good and valid points although I look differently at all of it. To me the biggest drawback is that mobility can be more challenging. But on the flip side of that in many areas rent is higher than a mortgage so if a person has to move they could possibly rent out their home and they have their first investment property.

    Also I see it as an investment in the sense that you have to live somewhere, so you can either spend 30 years paying for a place you will eventually own or pay someone else for a place to live that you can never own? There is a good chance that whoever a person is renting from is not a renter themselves.

    There is also the risk of instability that comes with renting. When you are buying a home you are in control. When you rent, you are subject to the owner of the property. For myself I just see a better deal long term in owning versus renting.

  21. Kristin Zajac

    Thank you for this article Engelo! I agree with you completely. I live in Boston where both rents and home values are extremely high. I would much rather invest in rental property in an out-of-state market where I can get a return rather than purchasing a primary home for $800k and tying up all the down payment and other expenses in hopes that when I want to move the appreciation is in the right place. Glad to hear someone else sharing this opinion!

  22. Joseph Walsh

    It’s a shame you didn’t put more into this list. Pros/cons. As it stands, it’s a bit disingenuous, in that you focused in on a narrow set of pros/cons, and filtered out the tangential. Something like this would be of more value:
    1.) Qualifying for a mortgage requires a significant down payment,good credit, and add’s debt to your credit profile. That down payment could be invested instead. A mortgage can also help your credit rating over time, brings a tax deduction, and is generally lower than renting a similar sized apartment. It’s also immune to rent increases if a fixed mortage, which average 3% a year, it’s a trade off, and the ability to get a mortgage can be a barrier. (of course, if your credit is bad, you generally can’t get a “good” apartment either)
    2.) When buying a house, it’s tempting to buy as much as you can “afford” on paper, with no consideration of lifestyle changes. Similar to taking on an apartment that is more expensive downtown, and learning you can’t afford to eat out 3x a week. The difference is you’re locked in for the long haul (see #3), where when renting you can exit once your lease is up. You should buy/rent based on your budget, not your “qualification level”
    3.) your tied to the location. With an apartment, you can move once your lease expires, or possibly break it with a small cost. While you can move with a house, you have to either sell it, or rent it out, neither of which is easy. Either could make you money, or cost you money, depending on the market. Similar to investing in stocks. The assumption is over time, values will increase, and you will make money, but it is not guaranteed. With an apartment, all you are out is your non-refundable portion of your security deposit. WIth a mortgage, typically one year is not enough time to sell a property and “break even”.
    4.) Houses can have unexpected and varying maintenance costs. With renting, your cost for maintenance is fixed for the length of your lease. While you do pay for it, it is included in your rent, and overall it is spread out over many years, some of which you may not even be living there to incur. You are subject to potential rent increases yearly, however, you are not subject to a $3000 furnace replacement in the middle of winter. Of course, it is also possible you never have a major unplanned expense while owning a home for the average duration of 5-7 years. Still, you need to set aside a contingency, on top of the contingency you would have to set aside as a renter. This is money which could be invested however.

    Disclaimer: I see absolutely no advantage to rent vs buy, unless you live in an inflated market, or expect to relocate several times in the next few years.

  23. Gina Na

    You have to consider this on a case by case, location by location basis. I used to think the same as you and it worked for me for a while . I live in Chicago and over the past 5-7 years it has gotten ridiculously expensive. I was looking to rent and quickly saw that the rents for a one bedroom (700-900sqft) in the city were between 2-3K. Rents are climbing with new construction rentals going up like crazy (students primarily are driving this) I dont see signs of this slowing in Chicago (bust coming soon?). I also found that I was limited to certain areas if I wanted to stay on the low end of that range and those areas were not too desirable considering my commute time for work and other things. It quickly made more sense for me to buy because my mortgage would either be at the low end range of rents or lower. Home buying also expands choices of where in the city you can live and what you can buy (something more than 700sqft). You idea works only if rental prices are reasonable or more affordable than buying, because ultimately you have to be able to save. That’s how I was pushed into real estate.

    • Engelo Rumora

      Thanks Gina,

      I own a property in Chicago.

      There are stellar condo’s for rent that are cheap.

      Nothing comes without hard work or sacrifice.

      Most people aren’t willing to put in the time.

      Knowing the Chicago market like I somewhat do, I still think it’s better/cheaper to rent than own.

      Just my opinion

      I wish you much success

  24. Owen Franks

    I never get why people say ownership ties you down but renting doesn’t.

    I own my home and could leave it tomorrow, renting it to someone else and go wherever I please. But if you rent, you’ve got a lease of up to twelve months (or more) tying you to one place. I have several times moved out of homes I own and rented to others to move all over the world – the UK, France, and America. And now those homes have turned into little green soldiers fighting for me and bringing in rent, but I got the pleasure of owning my own home too.

    The one big exception I would make here is for ‘risky’ properties – I mean real physical risk. I recently stayed in a place in St Augustine FL. Beautiful location. Right on the beach.

    I could be very happy there. But with Hurricanes hurtling through every September, I wouldn’t want to take on that risk. But I’d happily rent my own place out, and rent a place like this for myself to live in:


    • Engelo Rumora

      Thanks Owen,

      You could used the equity in that home and invested it to make so much more than it just sitting in a property doing nothing.

      I have always preferred staying very liquid and just constantly multiplying my “green little soldiers” by doing deal after deal.

      It’s an active path but also a quicker one to financial freedom in my opinion.

      Much success

  25. Francine Brown

    we are going to sell our home.. we will pull out equity and pay the same amount or less when you look at capex on homeownership and time with maintenance, etc.. The cash flow we will gain from the equity from the house will pay more than 1/2 our rent and we will have more time that isn’t spent on taking care of our home. win, win.. scarey but a win, win.. we are ready, plus the added tax benefits of having a corporation and some of tax write-offs we will gain from that, too. we will be paying the same amount of rent we were paying 20 years ago.. plus in 10 years by reinvesting that cash flow we can pay for our dream home in cash… I’ll take the sacrifice now..

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