Money Rehab with Nicole Lapin - When Renting Makes More Sense Than Buying

Episode Date: December 9, 2025

Today, Nicole unpacks one of her hottest personal finance takes: buying a house is not always an investment. Today, she breaks down the numbers to show when renting makes more sense than buying.

For the holidays, my family and I are headed to Florida to visit my in-laws. It is super important to me that my daughter knows her extended family and has the opportunity to spend time with them. While we're leaving one warm zip code for another, I know we'll still be getting that cozy holiday feeling of being with loved ones. The not-so-cozy part is the cost of flying three people across the country. I know a lot of us are feeling that this time of year. The costs add up fast.

That's why I love hosting my home on Airbnb. It's an easy way to bring in some extra income while we're away and that extra cash can help fund our next trip. Let's say you have a big trip planned or are escaping to a warmer part of the world to work from the beach. Why leave your home sitting empty and dark when it could be making money for you? This year, it's easier than ever to host your home thanks to Airbnb's co-host network. With the co-host network, you can hire a local co-host to take care of your home and your guests while you're away. A co-host can do it all. Create your listing, handle check-ins, provide on-site support, and give you peace of mind that your home and guests are being taken care of while you're

away. So if you've been thinking about hosting but you don't know where to start, find a co-host at Airbnb.com slash host. I love Boba. My go-to-order is black milk tea, 25% sweet, light ice, and brown sugar boba. It's my favorite afternoon pick me up, but it also meant my wallet was permanently packed with those tiny stamp cards. I swear I can never finish a single one. The shop would hand me another and tell me, just combine them. Yet somehow the next time it came time to check out, I'd need to start a new card. So I almost never get that free boba I'm supposedly working toward. All that changed when my favorite shop switched to Square and started to use Square's loyalty program. Suddenly, my stamp card was digital and my loyalty was actually being

rewarded. While it feels like a perk for me, it's also a big benefit for the shop. Loyalty customers spend 53% more per visit on average, but that's not all Square offers. With Square, you can track sales, manage inventory, and access reports in real time, whether you're in your shop, on the go, or running things solo. With Square, you get all the tools to run your business with none of the contracts or complexity. And why wait? Right now, you can get up to $200 off square hardware at SQUA-R-E.com slash G-O-M-N-N. That's S-Q-U-A-R-E dot com slash G-O-M-N-N. Run your smarter with Square. Get started today. If you take only one thing away from today's episode, Money Rehabers, let it be this. In my not so humble opinion, Public is the best

brokerage for investing in bonds, stocks, ETFs, options, and even crypto. You can try it out for yourself and see why I love it so much at public.com slash money rehab. Public is legit the only platform I use to buy bonds. Before public, I used to buy government bonds the hard way. Slow websites, confusing interfaces, website designs straight out of early 2000s. Just picture where fun goes to die. That was it. And then I found Public. About five years ago, and I have not looked back. I can now finally buy bonds without wanting to rip my hair out. Public makes it so easy to buy bonds, whether you're into treasuries or corporate bonds, you can browse thousands of options right from your phone. But like I said, public isn't just

all about bonds. You can also find stocks and ETFs. And they offer a high-yield cash account with a 4.1% APY, which is higher than the national average. They even have retirement accounts. You can now open a traditional or Roth IRA or both right on public. So your future self covered. And for a limited time, you can earn a 1% match on all your IRA deposits, IRA transfers, and 401k rollovers. If you want an investing experience that's both smart and simple, head to public.com slash money rehab. One more time, public.com slash money rehab. This is a paid endorsement for public investing, full disclosures, and conditions can be found in the podcast description. I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for

some money rehab. I'm about to tell you about one of my least favorite opinions in personal finance. Renting is just throwing money down the drain. I want to roll my eyes every single time I hear that. You might have heard me debate Paul Mark Morris, the real estate investor, about this on the show, but I wanted to do an entire episode because there is honestly so much to dig into you. And it's a question where you really need to follow the money trail and you can't just trust what's being told to you as gospel. And if you're just listening to this episode, I would highly encourage you to please watch on Spotify or on YouTube. we are animating this episode up with pretty graphics and actually showing you the math, which I always think is easier to follow.

Before we dig into this, I just want to give you a heads up up front that I don't think buying a house is the right financial move for everyone. It could be, but it's not for everyone. And in fact, in this economy, I think buying a house is actually the wrong financial move for a lot of people. But I will be fair, and I'll start with some cases for buying a home. The big one is equity. The logic goes, instead of handing rent money,

over to a landlord every month, you buy a home and you build wealth through ownership. In theory, this makes perfect sense. Each mortgage payment you make chips away at the loan balance and over time you own more and more of your home. And then after 30 years or whenever your mortgage ends, you own your home. The end happily ever after. No more mortgage, no more monthly payments for your home. Then you've got this big valuable asset that you can borrow against, you could pass it down or you could sell hopefully for a profit. It's also pretty cool that the interest on your mortgage is tax deductible. I do love a tax deduction where I can get it. And if you do have a fixed rate mortgage, your monthly costs will be constant. If you're renting, your landlord might

be able to raise your rent annually or just keep pace with inflation. With a mortgage, your monthly payments won't rise with inflation. And we love that. But that is only half of the story. Let's talk about the other side of equity. You don't get all your money back when you sell your house, aka you do throw some money away when you buy a house too. There are closing costs when you buy and when you sell, which can run 6 to 10% of the home's value. You've got property taxes, homeowners insurance, and interest on your mortgage, which is heavily front-loaded. There's also repairs, maintenance, maybe HOA fees that you never get back. The interest on the mortgage is a piece of all of this that blows my mind the most. If you buy a $500,000 home and you put 20% down,

with the current average interest rates, you're going to be paying over $400,000 on interest alone. So your $500,000 house will actually cost you more like $900,000. And like I said, interest on your mortgage is tax deductible. And that is a beautiful, beautiful thing. But that does not make it free money. In fact, it's really freaking expensive. And the interest factor will throw a wrench in your whole equity building thing because in the first year of your mortgage, the interest is front loaded. So using the same example of the $500,000 home, after five years, you'll spend more than $133,000 in interest alone, but you'll only pay down $26,000 in principle. So despite writing checks for five whole years, you've actually built very little equity. So if you had a dream of this

$500,000 home being something you could flip really quickly and turn a profit on in a few years, I'm so sorry, but the math there is not mathing. But let's just say you became disenchanted with this entire thing and you decide to invest your savings instead. If you took that 100K that you would have put toward the down payment and invested it in the market at the historical 10% annual rate of return, it could be worth $160,000 in five years. Let's follow the money trail here even deeper because we just talked about how stocks appreciate, but real estate appreciates too. And lately, wow, it has totally been true.

I cannot and will not deny it. I've seen people build real wealth from their homes over the last five years. But historically, U.S. home prices only appreciate about 4.5% per year. That's good, but it's not S&P 500. good. The S&P 500 has averaged around 10% per year over the long run, and that difference adds up big time. Let's just do a simple side-by-side comparison here. Let's say you're deciding between renting and buying in L.A. The average monthly rent in Los Angeles is $3,000 a month. The average monthly mortgage in Los Angeles is $5,000 a month. So let's say you rent. You're

saving $2,000 a month by paying the average rent instead of the average mortgage. So you decide you'll invest that monthly and you'll invest that 100k down payment. After 30 years, you'll have $5.7 million. Meanwhile, if you bought a $500,000 home, after your 30-year mortgages paid off, your home will appreciate to about $1.9 million, which is awesome, good for you. But again, with interest, you'll have paid over $900,000 for your mortgage, which means that your margin is a lot lower than if you would have invested. You'll have profited around a million bucks. In the case of investing 2K a month and renting, you'll have spent $820,000 but made $4.9 million in profit. So what would you rather have? $4.9 million or $1 million? Don't get me wrong. I'm not saying

that buying is always a bad idea. Buying can make sense if you plan to stay in the home for a long time, at least five to seven years, ideally longer. Or if your total monthly cost, of ownership is close to or less than rent. Or if you're in a market where rent is rising sharply and buying locks instability. Or lastly, if you just want to buy a home and you can afford it, if it gives you the feeling of stability, that can be priceless. Buying a home is not just a financial decision. It's a lifestyle decision. There's value in stability and having control over your space in painting the walls whatever color you want. But let's also be thoughtful about the opportunity cost and also just retire the renting is throwing away money argument because really

renting buys you a lot shelter for one safety flexibility no surprise repair bills no new roof to replace no foundation cracks to worry about no property taxes and often lower insurance premiums those are all your landlord's problems renter's insurance is a lot less than homeowners insurance we don't say that we're throwing away money when we buy groceries right Rent is paying for a service, the service of having a place to live without a long-term commitment and usually a lower financial burden. Just know that renting is not a failure. It's not a phase you grow out of. It's a valid financial strategy. Homeowners don't just pay a mortgage. They pay for property tax, insurance, repairs, appliances that break landscaping and so much more. Renters

skip all that. And that means they have more money to invest and grow if they stay consistent with it. Renting is not wasting money. It's buying you options. And in finance, optionality is very powerful. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan LaVoy. Our researcher is Emily. homes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, money rehab at money newsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously,

thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make. You know what I'm going to be.