Renting Versus Buying a Home in 2025: Which Builds More Wealth? 

Renting versus buying a home is one of the biggest decisions first-time buyers face in 2025. While renting may seem cheaper month-to-month, this blog reveals why buying often builds significantly more long-term wealth—even in high-rate markets. We break down the financial myths, explain total cost of ownership, and help you run the real numbers to make a smarter choice for your future. If you’re stuck between renting and owning, this guide shows you how to stop comparing just monthly payments and start thinking like a wealth builder.

Why Renting Seems Cheaper—but Isn’t Always Smarter

One of the most common questions I get as a first time home buyer coach is: Is it better to rent or buy a home in 2025?

At first glance, renting can appear to be the more affordable path. Especially in 2025, where interest rates remain elevated, comparing your rent to a potential mortgage payment might leave you thinking, “There’s no way I can afford to buy.”

But here’s the mistake most people make: they compare just the monthly cost without accounting for what each dollar is doing. Rent is 100% expense—money you never get back. A mortgage payment, while possibly higher, includes principal that builds equity.

“You’re comparing rent to a mortgage payment and making a huge decision based on just one of 10 to 20 variables—don’t cheat yourself with bad math.” – David Sidoni, How to Buy a Home Podcast Ep. 355 – Should I Rent or Buy in 2025?

Over time, that equity becomes one of your biggest assets. Rent never will.

How Mortgage Calculators Mislead First-Time Buyers

Online mortgage calculators are useful but dangerously incomplete. They show you a monthly cost but fail to include:

• Tax benefits from mortgage interest and property taxes
• Equity accumulation (the portion of each payment that pays down your loan)
• Home appreciation over time
• Rent increases you’ll face if you stay a tenant

These tools give you the cost of buying today without showing how it compares to renting over 5, 10, or 30 years. That math almost always favors buying, even in higher-rate environments.

The Long-Term Cost of Delaying Your Purchase

Waiting to buy may feel safer—but it can come at a steep cost.

Let’s break it down:

Scenario 1: Rent and Invest

• Rent a 2-bedroom apartment at $2,100/month
• Over 3 years, you’ll pay $2,100 × 12 × 3 = $75,600 in rent — a cost with zero return
• Instead of buying, invest your $32,000 (would-be down payment and closing costs)
• Add $800/month (difference between renting and owning) into an investment account
• Assume a consistent 8% annual return

Total Value of Investments After 3 Years: ~$73,000

• Of this, $60,800 is your contribution ($32,000 upfront + $800/month × 36 months)
• ~$12,200 is earned from market growth

While $73,000 sounds strong, it overlooks the $75,600 lost to rent. Net-net, you’re spending more than you gain.

Scenario 2: Buy a Home

• Buy a $400,000 home with 5% down ($20,000) + estimated $12,000 in closing costs = $32,000 upfront
• Monthly mortgage payment (PITI): $2,900
• Over 3 years, you pay $2,900 × 12 × 3 = $104,400
• This includes paying down about $12,600 in principal (due to front-loaded interest)
• Home appreciates at 3% annually → grows to ~$437,000 = $37,000 in appreciation

Total Wealth Built:

• $12,600 (equity from loan paydown)
• $37,000 (equity from appreciation)
• = $49,600 in total equity

Comparing Rent + Investment vs. Buying a Home

Even with a generous return and no rent hikes, renting still results in net negative cash over 3 years.

Now factor in additional homeowner advantages:

• Mortgage tax deduction: Up to ~$5,000/year × 3 = ~$15,000 in tax savings
• Refinance potential: If rates drop, owners can refinance and reduce payments
• Market risk: Renters may face rising rents and higher home prices later
• Stability & control: No landlord surprises or forced moves

Bottom line? Buying creates lasting equity and stability. Renting is a guaranteed expense.

Even in a high-rate market, the long-term math heavily favors ownership for anyone planning to stay put for 3+ years.

Rent Replacement: Turn Your Largest Expense into Equity

Rent is likely your biggest monthly expense—and it does nothing for your future.

If you’re paying $2,100 a month in rent, that’s over $25,000 a year disappearing into someone else’s pocket. After three years, you’ve spent more than $75,000 and built no wealth.

Now imagine replacing that rent with a mortgage payment. Sure, the cost might be $2,900 a month—a difference of $800. But that difference isn’t lost money. It’s building your future.

Here’s how buying flips the script:

• Each mortgage payment builds equity—your monthly principal reduces your loan balance, not your landlord’s bank account
• Over 3 years, you’ll pay down approximately $12,600 of your mortgage principal—this is because early mortgage payments are mostly interest, a process known as front-loading. While the total monthly payment stays the same, only a small portion goes toward reducing your loan balance in the beginning years.
• Meanwhile, at just 3% annual appreciation, your $400,000 home grows to roughly $437,000
• Combined equity (loan paydown + appreciation): about $49,600 in ownership wealth

That’s nearly $50,000 working for your future instead of vanishing into rent. And that doesn’t even include tax benefits, refinancing potential, or the stability of owning your home.

Compare that to $0 from renting. And remember—this is before even factoring in tax breaks, future refinance potential, and stability benefits.

At How to Buy a Home, this is called the Rent Replacement Strategy. Instead of throwing money into rent, you redirect it toward an appreciating asset that becomes the foundation of your wealth.

And even if you later decide to move, that equity can be rolled into your next home—continuing to grow your net worth instead of resetting your housing costs with a new lease.

Long-term, renting is a repeating payment cycle. Owning is a compounding wealth strategy.

What If You Have No Savings? A Path to Ownership

Many renters assume buying is off the table because they haven’t saved enough. But 2025 offers more options than ever:

• Low down payment loans (3% or 3.5%)
• First-time buyer grants and assistance programs
• Gift funds from family
• Local incentives for educators, first responders, or low-income buyers

The key is education. Know your options, work with a pro, and create a plan—even if that plan takes 12–24 months. Owning is still possible, and it’s often closer than you think.

How to Decide What’s Right for You in 2025

There is no one-size-fits-all answer. But here are some signs you’re ready to explore buying:

• You plan to stay put for 3+ years
• You’re tired of rising rent
• You have a stable job and manageable debt
• You’re willing to learn the process and build a team

Buying a home is about more than numbers. It’s about taking control of your future and using your housing payment to build something for yourself.

Ready to Start Your Homebuying Journey?

If you’re planning to buy your first home — especially during uncertain economic times — having the right team makes all the difference.

Find a trusted real estate expert here to help you navigate inspections, negotiations, and escrow with confidence.

Have specific questions about your situation? Ask David your homebuying question and get personalized advice.

Prefer to explore more at your own pace? Access our free first-time homebuyer resources here.

Rent feels safer—but in 2025, skipping the full math could cost you more than you think. In this episode, David Sidoni breaks down the timeless rent vs. buy debate with a 2025 twist, delivering a deep-dive into the full financial picture first-time buyers need to make smart choices. While renting may seem cheaper at first glance, David walks listeners through the overlooked math that makes homeownership a long-term wealth builder—even when mortgage payments are higher than rent. Using real numbers and multiple market scenarios, he explains why simple online calculators don’t tell the full story. Whether you’re unsure about affording a home or think you’ve missed your chance, this episode gives you clarity with facts, not fear.

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Real Answers Pt 4: Should I Rent Or Buy in 2025?

What is up my how to buy a homies? I wish you a happy and positive. Welcome back to the show. This is part 4 of the 20 questions series. The rant’s out of my system. Let’s continue with more Q&A. We’re going to tackle the eternal question. Should I keep renting or is it time to buy a home? Play that happy music.

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The Core Question: Rent Vs. Buy In 2025/2026

The old rent versus buy question. Now in 2025 and looking forward to 2026, I know a lot of people are dying to hear the full numbers and get the whole equation on how this works today, not just the traditional rent versus buy. I promise at the end of this episode, I’m to go deeper into the math than probably anything else you’ve ever heard on the topic. I’m going to give you all the nerdy, arithmetic-laden, I mean, a full number palooza.

There’s no room for doubt. What is the best decision for you to make? Not a lot of people are going to give you all this math, and why am I one of the few, if not the only one, taking the time to go deep into these numbers so that you can make a clear and informed choice? The sad reality is that because the number one rule in sales is don’t confuse them out of the deal, just get the deal. Long-time readers know that I think more of you than that. This isn’t a sale, it’s a choice, and it’s your choice.

I’m not selling, I’m just here to educate and let you make an informed decision, one that best fits you. Now, for some of you out there, maybe for the next little while, renting is the best choice for you. For many of you, even if you’re looking around and you see that prices and rates are just too high and you think, “I missed my window,” buying still might be the most sound fiscal move for you. I’m sure that many of you probably asked yourself lately, “Is it even worth trying to buy a home right now?” I get it, on the surface, renting feels easier.

You look at the numbers, and then renting looks better. It’s no commitment. It has no big upfront costs. If something breaks, it’s not your problem. Some of you guys, you’re still curious about this. You go to a mortgage calculator, you punch in the down payment of 5%, 10% or 20%. You look at that monthly payment. Crap. That’s more than your rent. Now I know a lot of you logically assume there’s your answer.

Debunking The Simple Monthly Payment Trap

Why on earth would you plunk down a huge pile of hard-saved money just so that you can pay more each month to become a homeowner? That’s the big mistake that the big math at the end of this episode is going to show you. I totally understand why this big mistake happens all the time. I really get it. I see why many people out there have come to that decision.

If you’re using a calculator and you’re just looking at the simple math, if your monthly rent payment is $800 less than a mortgage, you probably think, “Now’s not the time for me to buy.” You choose to chill and wait for the market to come to you. I’ve seen this before. This is about my fifth time that the buying market has been in this same unaffordable situation. Since I started back in 2006, I’ve been looking at the math, not my first rodeo. Happening 2015, 2017, 2019, 2021, and yeah, even 2023.

Every single time when you do all the big math, homeowners come out on top over the renters. Looking forward, the math is going to say it’s the same thing today. That’s because comparing your rent payment to what would be a new monthly mortgage payment, that’s only uses a few variables in an equation that actually has 10 to 20 different variables. Many of those variables that people are not accounting for are speculative.

That’s because they’re in the future. That means it’s extremely difficult to calculate with any accuracy. Naturally, since that can be rather complex, people just go to that mortgage calculator and they stick to the easier monthly payment math. Something they can comprehend straightforwardly, something they can wrap their brain around. People make what they see as a rational financial decision, but without doing all the actual full finances.

This happens all the time. Before I get into all that math, I’ve got to get in your head a little bit. If you’re just looking at the more expensive monthly payment, you are like someone who’s been living on a farm without a TV or the internet, and suddenly someone comes up and hands you a smartphone with Wi-Fi. Now you’re sitting there and you’ve got all the proper information. Soon, you see a whole new world, and you’re going to be watching YouTube tutorials on crop planting and cow milking.

When you see it all, it’s a lot different. It’s not just a financial question. It’s a mindset shift. If you haven’t figured it out, you haven’t seen this before. Guess what? It’s not your fault. The logic of the big picture math isn’t easy to explain. Therefore, it’s not easy to find. I blame the lame-ass, uncaring, and low-key shady real estate industry for only giving you a mortgage calculator in zero direction. It’s like they trapped you on the farm, making you have to defend yourself, Amish style.

What are you going to do? You and the rest of the renting population can only make informed decisions based on, here’s a shocker, information. I’ve done the research and I know that they are not offering the right information to guide a first-time homebuyer, especially in this new economy. Because of that, I’ve seen one survey that says 40% of renters think they won’t ever own a home. I saw another one that had it as high as 62%.

The longer you own a home, the more wealth you build—and in 2025, more importantly, the less rent you lose. Period.

Another one said that 65% of the people who tried to buy a home wondered if it was even worth all the stress and the cost. Now this bums me out because I am sure that 100% of that 40%, 62%, and 65% only found probably less than 20% of the full information needed to make an informed decision. Homies, for you, you’re going to get the other 80% of that information. BT dubs, if that was too many numbers for you to digest in your ear holes, that’s nothing, gang.

The Power Of The Rent Replacement Strategy

Math’s coming, so buckle up. Back to your mindset. I get it. Renting can seem like the safer choice right now. A lot of you are thinking, “That’s my only choice. That’s a very real feeling. I definitely don’t want you to feel bad about that.” I’m not chastising anybody, and I’m certainly not calling anybody dumb. In these tough times, the mindset shift starts with realizing it’s not just the difference in the monthly payment because 100% of your current rent payment can go into your new home payment.

In fact, it will go into your new mortgage payment. Voila! Rent replacement strategy. With a rent replacement strategy, you take into account that your rent is going to be redirected into your own investment. The potential for appreciation, tax benefits, principal reduction on an asset, and the rent replacement strategy of using 100% of your largest monthly payment for you and your wealth instead of just a lost shelter payment?

That means it’s not Apples to Apples, it’s Apples to Apple Orchards. When I say that even in 2025, the numbers still work in your favor, and waiting for the prices or the rates to drop could mean that you get priced out and miss your window entirely. That’s when the haters chime in. “There it is. That’s the hard sales pitch. The window. Here’s another scummy realtor trying to push renters into buying a home at the total top of the market, warning about some window of opportunity.”

Why Waiting To Buy Is Mathematically Unsound

First up, who the hell was that guy? Regardless, I don’t blame him for feeling that way. There are way too many untrained hacks with a real estate license that are talking out of their butts. Of course, people are going to feel that way. Let me clarify, when I am talking about a window of opportunity referring to renting versus buying. I don’t mean buy now because real estate always goes up. I wasn’t talking about a price increase window.

I was talking about the same window that I’ve been talking about for twenty years to first-time home buyers. When you’re trying to time the market, most everybody misses the window of wealth building. That window of wealth building starts the first month you turn your big rent payment into a mortgage payment that goes into an asset that will grow over time. You cannot travel back in time to get an earlier date to get larger returns.

The window and jumping through it, that’s your start date. You cannot make it go back. The longer you own the home, the more wealth you gain. More importantly, in 2025, the less rent that you lose. The end. Curtain. Speaking of curtain, did you watch the Tonys? Did you see the Hamilton 10-year reunion? Epic. To those of you out there scoffing at my love for musical theater, I’ll have that on that same night, right after the Tonys. I watched the NBA Finals, Game 2, DVR’d it.

The Thunder and SGA crushed Indy that night. Try and figure me out. Who is better to help explain the paradoxical mindset shift that it takes to comprehend the illogical financial gains of a home purchase when the market feels like it’s at top value, which may increase your monthly payments, in fact, by hundreds? For some of you, maybe even by a thousand or fifteen hundred bucks a month? Me. I live in this world of incongruity.

This is my jam. Also, I have the benefit of personal hindsight because in my twenties, I missed my own window. I could have bought a 21, and I didn’t. I had a considerably more difficult life because of that choice. At 30, I had to start from scratch. If someone had just told me about this when I was 21 years old, sitting there at 30, I would have been set for life and could have done anything I wanted to do.

For decades now, I’ve helped people buy homes that were more than their rent for that monthly payment. Why? It’s because my dumb ass learned the hard way. Here are two mindset affirmations for you. Buying a home isn’t about beating your current rent. It’s about ending your rent forever. Another one, a home is a savings account that you can live in. You can set it and forget it. That will equal long-term wealth.

When things get tough, people are looking for things that feel comfortable. Renting is a comfort illusion. Now, it feels stable, but it’s not building anything. Every rent check’s gone forever. You guys all know that. You know that the first day that you own a home, for most of you, that’s the day you start building the largest wealth of your life. Don’t let anything put that mission on pause. All that said, you should only buy a home when you’re ready and able to do it and if the timing is right for you. Just make sure you have all the information.

Challenging Misleading Financial Advice

I know it can look illogical to try to do this in 2025 and 2026, because when you do this, whenever you do this for you, buying a home isn’t just about trying to time the market, and it isn’t just about trying to have a place to live. It’s about a step towards building your future wealth. Before I bust out the full math formula, I want to debunk some of the financial gurus out there who are propping up renting over buying.

I’ve been hearing a lot of these guys over the last couple of years, including Warren Buffett, which is crazy. Uncle Warren, if you want to hear my opinions on that, check out the How to Buy a Home YouTube channel. We did a video on that. Warren’s a legend, but there are a lot of new people that are getting into the financial advice game, and they’re filling up their social media, their YouTube channels, and their subreddits.

Buying a home isn’t about beating your current rent—it’s about ending rent forever.

Young folks saying things like, “The games changed, don’t believe the boomers.” By the way, I’m not a boomer, I’m a scrappy Gen Xer, and I will fight you if you call me a boomer. You’ll lose because I was a latchkey kid with no internet who drank hose water, so don’t test me. Anyway, these new young gurus say things like, “Owning a home is a sucker’s play. Real wealth comes from renting while it’s cheaper now and then investing elsewhere.”

There’s one giant part of that sentence that gets so overlooked. The part about real wealth comes from investing elsewhere with the savings. That’s what’s pissing me off. Don’t worry, no rent coming. These new young financial gurus say this, and then people who are thinking about buying a home hear this and think that, “These new gurus are talking to me,” but they’re not. They’re talking to the straight hustlers, the rising grind crew, all looking to get rich super fast.

That’s a whole different life strategy. Straight up, no shade on anyone who wants to do that. The math I am sharing it can be for you, but it’s mostly for everyone else who’s thinking about doing a stable life. People who just want to live comfortably, and maybe they’re investing for a more reasonable amount, for a comfortable future, to just take what you’ve got and turn it into a comfortable now and an even more comfortable future.

Here’s how I’m going to do it. This is how I know my math is solid. I’m going to do the math for the hardcore investor, the people who say, “It’s a sucker’s bet. Don’t do that. Cool.” I’ll look at your numbers versus buying a home. When we trickle down to the people who are doing something stable, it’ll be even better for them. Let me start by asking a question to these hardcore people who are investing versus buying a home, because that’s stupid.

You guys have proclaimed yourself that you’re actively choosing to rent and you’re going to use that extra capital to invest. Have you created a spreadsheet for both those options for three years? Have you truly mapped out renting versus buying with all the data? Have you done the full math? Cool. Let’s say that you said, “Yup, dude, I did that. What do you think, bro? I’m a hustler, I know what’s up.” Cool. Can you stick to it? Have you thought this out? Living as cheaply as you can while you’re young?

Having a lesser life so you can invest as much capital as possible? Are you really going to stick to that? Do you want to sacrifice all that? You say you do. Cool. What do you drive and what’s your car payment? Shots fired, chief. “Boss, maybe that social media post that you’re all gung ho to get behind, maybe it just sounds good because it confirms an easier concept for you, so you don’t have to dig into something that you fear. Are you going to put your life on hold to put all your extra money into your investing so that you won’t show the really big rewards for that, for I don’t know, at least a decade?” If so, rock on. I applaud you.

If you stick with it, if you pay the difference between renting and buying every single month into your investments, non-negotiable. Let’s do the math. You got that three-year spreadsheet for both renting and buying. As I said, in order to demonstrate to all the non-baller people that just want a comfortable plan, I’m going to do the detailed math on renting versus owning for you taking your ultra aggressive financial wizard style, who is sitting on Instagram and TikTok, making fun of the poor sheep, the people that have bought it in the fairy tale of owning a home.

This should help inform everybody from hardcore to just regular old stable folks. After all, everybody can learn from math, even paycheck-to-paycheck people who aren’t trying to outsmart the housing market. They’re just trying to find a way to get into it. Let’s do this. Let’s nerd out. Here’s the full math, both sides, and we’re going to look at a three-year estimate of waiting instead of buying.

Now the spreadsheet on the renting decision seems easy. Average rent for a two-bed apartment in the US it’s about $2100. Let’s compare that with the average starter home is about $430,000. For the sake of argument, just to make it easy, we’re going to do a $400,000 starter home. That’s $2900 a month. That’s for the full PITI, Principal Interest Taxes and Insurance, $2,100 for an apartment, $2,900 for the starter home. Simple math, that’s $800 a month that you save when you rent versus buy. 800 times 12 is $9,600 a year that you can invest for 3 years.

Wait a minute. Actually, the $9,600 annual difference is only guaranteed for year one. You absolutely cannot count on $9,600 for year 2 or year 3. That’s speculation. Did you factor in the speculation? Do you realize that this is not a linear equation? Are you picking up what I’m putting down? Sure, it’s $800 a month more this year but you cannot extrapolate that out to year 2 or year 3 without taking into account potential rent increases or changes in home prices or mortgage rates, which means you’re basing your decision to wait to get into the housing market on many events that are happening in the future.

The future has variance. Here’s just a couple of potential variants that could happen in year 2 or 3 of your waiting-it-out plan. Let’s say in year two, your rent goes up $200, and we’ll say the interest rates stay the same at 6.9%. We’ll also say that home prices even stall out and they just stay flat. They stop appreciating because the interest rates are staying high. Now we’re going to run the savings number with the new variable for year two. The price is the same, the rates are the same, no change there. With that $200 rent increase, now it’s only $600 a month cheaper instead of $800 a month.

In year two, you only get a $7,200 savings instead of $9,600. Let’s look at a second variation. What if you get lucky and your rent only goes up $100, but the interest rates drop to 5.9%. That’s going to mean that home prices are now going to go up 7% because there are so many frightened buyers on the sidelines that they’re going to come flying out for that new lower rate, and they’re going to bid up the homes. Bidding wars are going to push up prices. Even though your rent increase was only $100 with the higher prices, you’re now minus $175, even factoring in a big 1% drop in interest rates.

Having the experience and using this math and formula across different markets is crucial. These two factors will be the main drivers over the next few years—we have high demand and low supply.

Now you’re only $625 cheaper a month to rent, dropping your annual investment capital to only $7,500, not $9,600. These are just a couple of variants, and I know they’re going to bum out the investor. Hopefully, this brings some clarity to all the regular renters looking to make the right decision for themselves. All the people looking to buy a home enjoy a slow and steady savings plan while they enjoy a comfortable life.

How do you guesstimate best when we’ve got these speculative variants? The future. How do you figure out rent versus buy and put in the future numbers? It’s tricky because most people assume that in 2025 and 2026, especially, the two biggest factors that they have to forecast and prognosticate are the home prices and the interest rates. The two factors that are going to affect home prices more than anything are the pent-up demand of buyers and the low inventory.

This is where going through this multiple times, having the experience, and doing this math and this formula during many different markets is so important. These two factors are going to be the main things that affect things for the next couple of years. We have a high demand for a low supply. If interest rates drop, those pent-up buyers are going to jump on the low supply and bid prices up. Conversely, let’s look at the math. If the rates stay high, that might mean that the buyers get sick of it and they stop going in. We’ve seen a little bit of slowdown already this summer of 2025, but let’s just say prices drop 1% to 2%. You’re paying at 2% down. You’re now paying $392,000 instead of $400,000.

That will save you a whopping $40 a month on your mortgage. Not a very big change for you, but the deal is when you’re looking at the future, and you’re understanding those two big variants. The high demand and the low supply. Most economists do not predict that this is going to happen because of

those two factors. I’m just scratching the surface on all the full numbers. There are so many more variables and lots more math to see this full picture. I haven’t even touched on the details yet. I’m recording this in the middle of the night, and I’ve had lots of coffee. I’m super pumped up to get into this. It is time for me to nerd out. Remember, these long-term formulas are not sexy.

They don’t have the simple 30-second shocking numbers that I could do in a quick video to wow you with some get-rich-quick scheme. It’s boring, but it’s correct. I know what’s more enticing. “Buying a home is for suckers,” or “Analyze a rent replacement strategy.” I know the first one’s going to get more clicks, but check out this math.

Let’s go back to the aggressive plan of the bro ham. I’m sorry. I keep using the mail when I’m describing the investor guy. I’m sticking to it. I’m running with it. The aggressive plan of the Brohams was to invest instead of buying a home. Now, even though that illustrated as unlikely that the savings will actually be a steady $800 beyond year one, for the sake of argument, I’m going to generously use that $800 savings for all three years because I want to eliminate the true math of renting versus buying.

I’m to use $9,600 a year for years 1 and years 2, and 3. The $2,900 a month mortgage payment, PITI, Principal Interest Taxes, and Insurance. Now, I calculated that payment based on a 5% down payment on a $400,000 home. Even with that 5%, I’m even being generous there because many first-time home buyers are using 3% and 3.5% down payments. I’m also going to use a full 3% for closing costs, though often it can be 2% or sometimes zero if you can negotiate with the seller to give you a credit and have them pay for it.

Again, we’re going to keep the numbers generous just because I want to show you how really it feels like it doesn’t make sense. If the math can beat the generous numbers, the initial cash required to buy. We’ve got the overestimated 5% plus the overestimated 3% and that’s 8% total on the $400,000 purchase, $32,000. The investor gets to see how the numbers play out, even getting that generous $32,000. I’m telling you, that’s the maximum that most buyers would need. It could be far less, but I’ll use the full 32K and I’m also going to give them the full $800 difference, even though years 2 and 3 are totally speculative.

Now, if he invests the $32,000 and then $800 a month, remember, got to stick to that plan. If you do that for the full three years, I’m going to give you the standard investment return. Now don’t get confused because the investment return is 8%, just like the initial investment was 8% of the $400,000. A lot of math, you’ve got to stay with me if you’re really going to get clarity on this. An 8% return is considered a strong, good average return for investing.

The Unbeatable Math Of Homeownership Over Time

He’s got $32,000 plus $800 a month on an 8% return in his investment. At the end of three years, that’s $73,000. Not too shabby. You’ve put in $60,800 in principal, and you earn $12,200 in interest. Now let’s see how that compares if Broham had bought a home. You take the $32,000 instead of putting it in that investment account. You’re going to put it into a $400,000 home. PITF payments, $2,900 a month. The average appreciation over the last 100 years is 4.5%, but I’ll be even more generous and I will make the appreciation low to show the Brohams’ numbers even better, 3%.

If we did that, that would mean the total value of the home three years later would be $437,000. $73,000 for investing for three years or a home now worth $437,000, a $37,000 profit in equity. Obviously, you see why it’s very easy for people to argue for investing. On the surface, after three years, it looks like $73,000 versus $37,000 for home ownership. That’s $36,000 in favor of the investment strategy. Missing in that equation is so much.

First of all, each mortgage payment that a homeowner makes reduces the principal on the loan of the home. You’re using 100% of what you would have paid to rent that goes to nothing. You’re paying it into your appreciating asset. When it comes to paying down the principal on the loan, you don’t actually get giant returns in the first few years. The bank does what we call front-loading the loan. Most of the interest is paid in those first payments that you pay over the first few years.

Each mortgage payment a homeowner makes actually reduces the principal on the loan.

Now, if you’ve never seen this before. This takes some math that not a lot of people break down for you. Hang with me because it’s important to help you see things clearly so you can make the right decision for yourself. For year one, $2,900 a month payment, that’s your PITI. Now of that, $2,500 is your P and your I, your Principal and interest. The rest, that’s your taxes and insurance. When they front-load the interest of that $2,500 of P and I, that means you’re only contributing $318.31 to the principal with your very first mortgage payment.

You’re paying $2,181.83 in interest. Now it goes up slightly each month, pay a little bit more in, but here’s how it works out. After three years, you still only average about $350 a month in principal payments. Homie alert, remember this piece of information for later, but even with these very low contributions to the principal from your payments, in the first three years, you’re going to pay down $12,600 of your loan. That’s now invested into an appreciating asset.

Now we gotta add that to the equity gained. Originally, we looked at $37,000 in appreciation. Now we add $12,600, and you’re now at $49,600 in your growth, actual on-paper gains, which still means the investor is $23,400 ahead because we’re at $49,600. They’re at 73 plus 23,400. In my extremely generous scenario to the investor, the investor theory is supposed to put you way ahead. Remember, I was super generous, and it still only got him $23,400 ahead. Again, that assumes that the investor spent the maximum $32,000 to make the purchase and has zero rent increases over three years and sticks to the plan of paying $800 over and above his rent into his investment account every single month.

The Value Of Non-Quantifiable Benefits & Tax Deductions

Let’s assume that Captain Rise and Grind Guy does this. Great. You’re ahead $23,400. What’s going on with your quality of life? If we factor that in, the homeowner owns a home. How much is the quality of life? Can we put a dollar amount on that? What about the stability for the homeowner? Never having to worry anymore about trying to time the market, not sitting and watching interest rates at home prices every single day. You’ve got your start date locked in.

How much is that worth to the homeowner? What about financial and personal control of your life? Never having to worry about a landlord raising your rent, or even worse, selling the home out from underneath you. You’ve got to go find a new place to live. What about the other portions of control? What about your ability and now complete control to upgrade a home, to renovate it, and to update your living space exactly how you like it. How much is that worth to you?

Is there a dollar amount on that? In this most generous of equations, the investors are ahead $23,400. If you added in all these non-quantifiable, non-mathematical different things that I just talked about, the stability, the control, the quality of life, I could easily see someone buying a home. Say that, that’s worth it to me. I’ll drop the $23,400 down to just $10,000. I’ll say, “If that’s worth the full $23,400 to me over three years, it’s dead even.”

Some of you might say that’s worth so much to me that now I feel like, on the homeowner side, that I’m actually ahead. Now that’s all personal and theoretical. I’ll tell you what. Remember how I told you to remember how much of your first three years’ payments went to interest? Now let’s get back to some actual dollars math. Were you bummed out when you found out how the banks front-load your payments and how little goes to your principal? Say that you didn’t think that any of those non-mathematical, difficult-to-quantify things, say you thought that none of them added any value to your life.

You still feel like you’re down $23,400. There’s one more thing. The mortgage interest tax deduction. In this example of a $400,000 home, you can actually reduce your taxable income by $25,000 as part of your deduction, the interest that you pay each year. That’s not dollar for dollar, but hang on, let me explain it. If you are a self-employed person who itemizes your taxes, I am not a tax professional, so please double-check your own personal numbers with a tax professional that you trust.

I have seen several buyers’ spreadsheets over the years, including over the last year. Those people got their advice from their tax pro. When I looked at it, here’s the example of what I saw. People who were in a 20% tax bracket lowered their tax base by 20% of the interest deduction because they’re in the 20% tax bracket. They get 20% of the $25,000 worth of interest. That means that’s a $5,000 reduction in their tax liability. Yes, math.

I told you it was going to be detailed. Summarizing all this boring stuff, which is very important to help you make this gigantic decision. With the very generous formula for the investor, it’s only a win of $23,400, not including those non-tangible items and not including the tax benefits. Let’s get real. It’s not going to stay the same for three years. What happens if rents increase $100 in year two and then another $100 in year three? That would be another $3,600 off the savings for renting versus buying.

The Strategic Advantage Of Owning When Rates Fluctuate

Now you’re looking at only $19,800 on paper. That’s before the quality of life, non-tangible items, and the tax benefits. Now we’re under $20,000. Of course, what about the market? What happens if rates change or prices change? The whole formula is out the window. The market never stays the same for three full years, let alone three full months. With these two giant factors, the pent-up demand of the low inventory, waiting for a better time to buy. I’ve already started the math, but let’s get into even more because it doesn’t make mathematical sense.

Here’s the big variable I’m going to toss into the equation, interest rates. This is why owning now, even in 2025 and 2026, is going to give you the edge because of those other two factors. The pent-up demand, the low inventory. Now, if interest rates drop as a home owner, as opposed to someone who decided to stay renting and they’re rate watching, thinking that they’re going to pounce on purchasing a home when the rates go down, here’s the way it works. If you already own the home, you have the option to get that low rate without having to scramble to try to buy at the perfect time.

The market never stays the same for three full years—let alone three full months.

You’re already locked into your home, and now you can refinance into that lower rate. Say the rates dropped to 5.9%. The person who bought instead of renting and investing, they just simply refinances into a lower rate. Since you bought with a good unicorn lender, a lot of those folks will do it for very little or sometimes even no cost at all, depending on what program you got when you signed up. In our on-paper mathematical debate, now the owner is only paying $2,650 a month.

The investor-renter, they’re starting to lose the battle on paper. That math looks like this. The investor had the initial $32,000 investment, plus $800 a month for the last 12 months. That’s a total of $44,616 if I’m giving them the 8% interest gained in the market. Twelve months in, rates dropped to 5.9%. The owner’s payment drops to only $2,650 a month. The investor, at the end of 12 months, sees the rates drop, and they also get a small rent increase of $100.

Now the rents increased to $2,200, and the owner’s only paying $2,650. The savings difference it’s only $450, not $80,000, but the investors like, “See, now my plan worked. I’m going to buy this home for cheaper. I got $44,000 instead of $32,000 because I invested for a year.” One problem. No way, two problems. Pent-up demand and low inventory mean that $400,000 home has been creeping up slowly in price as the rates have been creeping down.

When the interest rates dropped to below 6%, now that the home is now being bid up in a frenzy of buyers to $450,000. Now, if this sounds implausible to you, I’ve been researching and reporting on home prices here on the podcast since 2019. Go back and check the tapes. I’m not telling everyone, “Got to buy now, prices are going up.” I’ve just been reporting all the upticks in prices.

I kept doing it while many people were disagreeing with me, and most of the time, I did it because I said, ”There’s one thing going on right now with me now. What is it?” Inventory. I’m only here to report the relevant data and what it tells me or should I say more importantly what I do is I look at the relevant data and then I look at the leading economists who have been doing this even longer than me and I see how they’re prognosticating and forecasting and then I give that information to you.

Yes, for the whole six years I’ve been doing this podcast, I’ve been saying there’s still low inventory. Most likely, we’re going to see home prices going up. Every single time it’s happened, even though it doesn’t seem possible. In our example, the mortgage payment for the investor on a $450,000 home, even with the rate dropping, it’s $2,950. The homeowner who decided to buy a home a year ago they’ve got an equal home, but now they’ve got it with a $2,650 payment.

They’re sitting on $70,000 worth of equity in one year. $20,000 was their initial investment. That’s equity, plus the 50 they gained. Lots of math, are you with me? Which is the smarter mathematical deal? Investing for one year, the $32,000 to get that up to $44,000, but now buying a home because the rates dropped, but you’re paying $300 more a month for 30 years on the same home or buying a home 12 months ago with $32,000 when interest rates were so high, but now you’re paying $300 a month less for 30 years and you’re sitting on $70,000 in equity in just 12 months of home ownership.

Don’t forget, if you’re self-employed, congratulations, you also got a big tax write-off in that year. Boom, math, you just cannot beat it. You want more math? “No?” I guess you can turn the podcast off, but for the rest of you, I want you to leave today knowing that you have real clarity on the true numbers for renting versus buying. Here it comes.

Based on the example I gave, $800 more a month to own versus renting. Some say they’re just going to sit around and wait for home prices to drop. We know what happens if interest rates drop because of the massive pent-up demand, low inventory. What’s got to happen for the prices to go down? It’s if interest rates go up, because that means now really nobody can afford the payments.

The prices have to go down. That means if interest rates go to 8% and home prices will probably come down a little bit, 3%, 4%, 5%. For example, let’s say they go down 10%. That means if rates go up to 8%, houses go down 10%. Now you’re only buying a $360,000 home, 10% off the $400,000. If you bought that home in a year at 8% interest, you’d be paying the exact same thing, $2,900 a month. In a year, rates are at 8%, but you bought that home discounted, 10% off, rad? Now things are going great, except for getting that 10% decrease in prices. In the example I gave, it’s because interest rates went up to 8% and no one could keep buying a home.

If houses drop 10% and you’re waiting for that, that means the economy is in trouble. If you had all your money in investments while you’re waiting for the market to go down, the stock market is probably not performing very well if homes are down 10%. Now we have to have a whole new formula for you based on lower cash that you have on hand. I would say “Booyah,” but it’s depressing talking about home prices going down and the people who are waiting with the money in the market losing all the money they had in the market.

Not all, but it sure as heck isn’t going to be mathematically better for them to have done it. See, the total math beats the partial math all day long. It only sounds good because of everything that I just laid out for you. What am I an hour into this podcast? This is not super fun. It’s not super entertaining. It is definitely not cool. Most importantly, I get it. It doesn’t strike the passionate chord with you about how the boomers and the man are keeping you down and squashing your American dream.

It’s not called get rich quick. It’s called a rent replacement strategy. It’s mathematically based. I just want everybody out there to take a look at the full numbers and realize that even in 2025 and 2026. Again, I have empathy, and I understand it doesn’t look pretty right now. When you grasp all these numbers, you’ll see that you can come out on top. The biggest two factors, the pent-up demand, low inventory, cannot be denied, but they absolutely will not make my TikTok go viral no matter how hard I try.

Total math beats partial math, all day long.

The Path to Homeownership: Even With Zero Savings

It’s just way too much math to be cool. The good news is now you know. Now let me speak to all the homies out there who are like, “Dude, nice math story, but I haven’t got $32,000 sitting in the bank today.”Cool. What if you’re someone out there who has zero in savings and you are trying to contemplate the rent versus buy for you? Let’s see what happens if you set the goal of the 5% down payment plus 3% closing costs for a $400,000 home. Now, if you’ve got that average rent of $2,100, let’s have you try to pay the $800 a month into a high-yield savings account for three years.

That’s something straight from the ten steps that every first-time home buyer has to know. It’s the ninth step, I believe. It’s episode 309. It’s doing what we call a practice payment. If you could pull that off, and you invested $800, a high-yield savings account, some of the good ones are at 4.66% interest. At the end of three years, you would have $31,766.

Let’s call that $32,000. There you go. After three years, you’ve got $32,000 to buy a $400,000 home. Except wait a minute, that $400,000 was from three years ago. Will that home only cost $400,000? Now that you know the math, here’s your best plan. Save like you’re trying to do that three-year plan, but while you’re saving, explore all your options to buy along the way. With a goal that you want to get into a home as soon as you can and get the earliest start date that you can, because the math shows, it does not pay to wait.

Remember, the $32,000 goal. That’s a generous overestimate. You definitely might not have to save that. In the past 18 months or so, we’ve had readers who have received killer interest rate reductions, seller credits, seller concessions, and a whole bunch of them who have gotten different down payment assistance programs or grants. The cool thing is some of them stacked the programs and grants. You can have more than one.

There are interviews with clients, like I said, I think it’s the last eighteen months, that their rates were so high when they bought a home, but they only had to bring in, I think, one of them was $4,000, the other one was $7,000. Just recently, someone was $12,000 buying a $500,000 home. These were nice homes ranging from $300,000 $500,000 with 4, 7, and 12 grand total down payment and closing costs.

If you’re working with a dedicated team on that like three year plan, if you’re going for that way over the top $32,000 and along the way the markets something changes with them or your credit changes or programs fluctuate out there, new things are available to you, they can advise you of all those options along the way or alert you when there’s a dip in home prices or interest rates.

The great thing is, if you’re working with them ahead of time, you have your plan in place so you can pounce quickly on the best deals instead of scrambling to get all your documentation together to figure out what you can do when there are those moments that you can grab a deal. “Homies, are you not entertained?” Crap, I did it again. That is a reference from a movie from the year 2000. That’s from Gladiator, so most of you probably have no idea why I just yelled it into the microphone.

Of course, you’re not entertained. It’s an hour of math, but dang, entertaining you, that wasn’t my goal. Enlightening you was. Taking the fear out of the leap into home ownership. That’s what I was trying to accomplish here. If you’re doing your own research, I know the rent versus buy question is constantly discussed on personal finance forums and real estate advice columns, and anywhere else people talk about this stuff. I wanted to give the real math equal time.

It’s nerdy, it’s boring, it’s mathematical, but it’s equal time, hopefully. If you’re not sold on the math and you decide you want to wait it out and see what happens. You’re going to pay rent for another year, which is money you can never get back. You’ll have pushed your start date further down the calendar. Remember, there are no time machines for when you start the wealth-building of owning a home. The sooner your start date, the more wealth because it’s not just a payment into an asset. It is also a reallocation of your rent payment into that appreciating asset.

Homies, I speak from experience. I didn’t buy in my twenties. I didn’t know the math. Now I have dedicated my life to making sure that no one else is uninformed. The revolution is here to empower wealth building when it feels hopeless, like it does. Even though all you damn kids who pull this off, you’re going to be able to flaunt your stability in my face, mocking me in my painful regret that no one had invented podcasts in the 1990s to go back and tell me what to do.

The average homeowner’s net worth is nearly 40 times greater than that of a renter. Even though it feels scary right now, even today in 2025 and 2026, you will not be 43 or 44 times wealthier than a renter if you try to time the market. The math just doesn’t add up. Homies, I hope this helps. You can do this.

Important Links

• How to Buy a Home on LinkedIn
• How to Buy a Home on Facebook
• How to Buy a Home on YouTube
• How to Buy a Home on Instagram
• How to Buy a Home on TikTok
• Ep. 309 – Stop Fearing Your Future Mortgage – Step 9 – Homebuying 101