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Landlords Have Higher Net Worth, But You Can Still Get Rich If You Rent

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Don’t let being a tenant stop you from growing your wealth.

Key points

  • Homeowners on average have a much higher net worth than renters.
  • The fact that they can build equity and acquire a valuable asset is one of the main reasons for this.
  • Renters can still get richer through smart financial choices.

According to the US Census, the wealth inequality between homeowners and renters is staggering. Census data shows that the median net worth of homeowners is 80 times the median net worth of renters.

Part of that is because people who buy homes tend to be more financially stable to begin with – otherwise real estate purchases would be out of reach. In other words, people who are already on the road to wealth are more likely to buy a home that makes them even wealthier.

A house is a precious asset

But, there’s also another important reason why homeowners typically end up with higher net worth. Their home is a precious asset. And when they make mortgage payments, it’s a kind of forced savings since their housing costs end up helping them buy a property that’s worth a lot of money. This, coupled with the fact that homes often appreciate or increase in value, can make a huge difference in a person’s final net worth.

The big question, however, is whether you are a tenant and you want to to buy a house? Does this mean you will never be rich? Not necessarily, but you need to make a more conscious effort to build your assets. Here’s why (and how)

How can tenants also get rich?

Tenants will have to work a little more to become rich than owners because they don’t have the monthly payments they have to pay for a property that will become theirs and which should see its value increase over time.

But that certainly does not mean that it is impossible for those who rent to become rich again. The key is to make sure you’re investing in other assets that are also expected to appreciate – and that you do so consistently.

Ideally, if you’re renting, you’ll be able to find a property that fits your budget well – and, perhaps, comes with less rent than what a mortgage would cost you. If you keep your housing costs to 25% or less of your income, try to save as much of the rest as possible with the goal of setting aside at least 20% of what you earn. It will be important to sin by saving more of your money due to the fact that your housing payment is not helping you to create a heritage as is the case when you are an owner.

You don’t just want to save that extra money, but you want to invest it in assets that should see their value increase just as homeowners can see the value of their properties increase. This way you can make the money work for yourself. Stocks are a good option, and you can choose an ETF that tracks market performance if you’re unsure how to choose individual companies to invest in.

By making sure you’re setting aside a good chunk of your money for wealth building — and ideally by automating your investments so you never miss a thing — you can have high net worth even without a home you own that’s one of your most valuable assets.

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