How to Build Wealth Without Buying a Home

Red shoes from above on the white arrows,dilemmas concept buy or rent.
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Your parents may have told you to buy a home as soon as you could, because renting is only “throwing your money away.” Yet, many millennials delayed home-buying for a variety of factors, including financial concerns, student loan debt and simply not wanting to deal with the hassles of homeownership.

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A National Association of Relators study from 2019 showed that 22% of millennials delayed home buying — or even moving out of their parents’ house — due to student loan debt. Millennials still lag behind other demographics when it comes to homeownership, according to Apartment List’s 2021 Millennial Homeownership Report, released earlier this year. At age 30, 42% of millennials owned homes, compared to 48% of GenX at that age and 51% of Baby Boomers, the report found.

Looking at current homeownership, 47.9% of all millennials own homes, based on Census Bureau data. Meanwhile 69.1% of GenXers own their own homes and 78.8% of Baby Boomers own homes, the highest homeownership rate of all generations. The Silent Generation is only slightly behind, at 77.8%.

Although millennials may have fueled the latest housing boom as they fled cities for more space during the pandemic, rising home prices and a highly competitive sellers’ market are still keeping many millennials from the traditional “American dream” of homeownership.

Building Wealth

Zillow reports show the median home value in the U.S. stands at $262,604, but they are predicting it to rise nearly 8% within the next year. Fortunately, there are many ways to build wealth beyond relying on your home equity. In fact, counting your home as an asset — rather than a liability — on your personal financial spreadsheet, can be a costly mistake.

Discover: Why Now Is the Time to Downsize Your Home

Why Renting May Not Be a Bad Financial Choice

Older generations who embrace home ownership have often said that renting is letting someone else get rich or that you’re throwing money away with nothing to show for it. But, your home is only earning you money if it rises in value at the time you’re ready to sell. Even then, you’d have to recoup all the costs you put into it beyond the purchase price. These expenses include:

  • Renovations and remodeling
  • Repairs
  • Landscaping and snow removal
  • Homeowners insurance
  • Taxes
  • Interest
  • Closing costs and fees

Although rents are slowly rising in major cities as the pandemic begins to wind down, with the median monthly rent in the U.S. at $1,058 according to Census Bureau Data, renting has fewer costs associated, including unexpected costs such as home repairs.

How to Make Money Without a Home

A report referenced by MoneyWise found that the actual rate of return on real estate between 1975 and 2009 was less than 0%. Not only did most people not make money on the sale of their home, but they lost money in the transaction. With home prices high right now, that percentage does not look better for homeowners in this decade, either.

Building Wealth

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On the other hand, the stock markets average return for the same time frame was 3.375%. A lot of things have changed since then, including a bull market with the Dow Jones Industrial Average at an all-time high, and the advent of retail investing apps making it easier than ever for people to invest. There are virtually no barriers to entry for investing anymore, when apps allow you to roll your spare change into an account and buy fractional shares of blue chip stocks.

In 2020, the average rate of return on S&P 500 stocks was well over 10%, according to Motley Fool. Motley Fool also published the Compound Annual Growth Rate (CAGR) of multiple types of investments from 1926 through 2019. Small cap stocks have a CAGR of 11.95 while large-cap stocks have a CAGR of 10.2%. More conservative investments such as government bonds and treasury bills show a CAGR of 5.5% and 3.3%, respectively. No matter how high or low your risk tolerance, any of these investments show a better return over time than homeownership.

Building Wealth

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Building Wealth

About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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