The idea that renting is "throwing money away" is flawed. Rent is payment for a service that provides shelter, flexibility, and insulation from the risks and hidden costs of homeownership like surprise repairs, property taxes, and maintenance. This "optionality" is a powerful, though non-tangible, financial asset.
In the initial years of a mortgage, the vast majority of payments go toward interest, not the principal loan balance. For a $500,000 home, you might pay over $133,000 in interest after five years but only reduce your principal by $26,000, making short-term ownership and flipping unprofitable.
The purchase price of a home is deceptive. When factoring in the total interest paid over a 30-year mortgage, the actual cost can be nearly double the initial price. For a $500,000 home, an additional $400,000 could be spent on interest alone, dramatically altering the long-term financial reality of ownership.
Renting enables a powerful wealth-building strategy. By renting a cheaper property and investing the monthly savings plus the initial down payment, one can generate significantly more wealth than through home equity. A hypothetical scenario shows this strategy yielding a $4.9 million profit over 30 years, versus just $1 million from owning.