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Homeownership has been touted as the American Dream for many years, but more people are opting out of this fantasy. While higher living costs have forced people out of the housing market, even high earners are choosing to rent instead of owning property.
A high-earning couple recently shared on Reddit that they have a $1.5 million net worth with $800,000 in liquid funds. Despite this advantage, the couple doesn't see themselves buying a house due to the math. They view renting as cheaper and even account for housing appreciation and rent inflation.
Other high earners jumped in the comments and shared their thoughts about staying put in rental properties instead of buying a home with their extra cash.
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Although rent has been touted as throwing your money away, the numbers paint a different story. Several Redditors commented on the price distortions between renting and buying, and one high earner shared their own numbers.
“I'm paying $3,500 per month to rent in a VHCOL area in SoCal; the equivalent mortgage is over $7,000. Sure is nice having fixed costs and $3,500 per month of free cash flow,” the high earner said.
Those savings are hard to ignore, especially since you don't have to put down a massive down payment just to own the property. High earners are opting to rent with these numbers instead of buying property. Then, they can invest the difference into a brokerage account. Mortgage rates remain elevated, and housing prices haven't gone down. These two factors are part of the reason why the current price distortions exist.
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Some high earners mentioned that landlords can raise rent each year and catch people by surprise. That's one of the disadvantages of being a tenant instead of a homeowner, but some high earners had a counter to this argument.
You can always move if rent gets too expensive and look for more affordable options. Some people move out of their units every few months so they can explore various cities. Renting makes more sense if you are traveling for most of the year.
