You may have seen recent news reports that renting is better than owning. But before that can sway your decision, you need to understand what these claims are based on.
These reports often make assumptions that are not realistic for the average household. For example, the methodology behind one of these reports states that renting is a smarter financial option because there are opportunities to invest your money elsewhere. It is envisioned that renters put into their investment portfolio the money they spend on expenses related to purchasing a home. But here’s the problem – most people who rent don’t make those investments, explains Ken Johnson, co-author of the BH&J National Price-to-Rent Index.

“One of the difficulties of the rental and reinvestment model, he said, is that there are a lot of people … just borrow and use the difference. . . it is the destruction of wealth. “

The reason homeownership is one of the best investments is because it’s the wealth that helps build it. Because of this, there is a large difference between the average homeowner’s net worth and the average renter’s net worth (see chart below). 

So before you renew your lease, think about the wealth-building opportunities that homeownership offers.