Why Renting Might Be the Smarter Move

So, yesterday I was at the gym, chatting with some random guy between sets. Didn’t catch his name, but he was this friendly, chatty dude in his 60s. We're making small talk, and he hits me with:

"So, where do you live?"

I tell him, and I already know what’s coming next...

"So do you rent, or own?"

Classic. Boomers always ask this. I told him I rent, and you guessed it, he gives me that look of pity. If only he knew I own a portfolio of real estate that will fully “retire” me in a few years.

Of course, I didn't say anything, wished him a good workout, and started my next set with a sly grin.

The Perks of Renting

No Maintenance or Repair Costs

Homeownership comes with a ton of hidden costs. Remember last summer when your AC broke down? You had to shell out a few grand to get it fixed. As a renter, that's not my problem. My landlord handles all the repairs. No unexpected expenses, no stress. I sleep easy knowing my budget won’t be blown apart by surprise maintenance costs.

Easy Mobility

Flexibility is another huge advantage. If I want, I can pack up and move without the hassle of selling a house. If I want to buy a van and follow Phish around the country for a year, I can. No worrying about market conditions or waiting for the right buyer. I’m not tied down to a mortgage, giving me the freedom to take opportunities as they come.

No Yard Work

Here's a story for you: Every week from spring through fall, I used to spend half a day in the scorching Austin heat mowing the lawn, trimming bushes, and pulling weeds. Now? I don't have to lift a finger. The only greenery I worry about is the plant on my balcony. My weekends are now for relaxation, not yard work.

Freedom to Travel

Imagine this: you want to take a month-long vacation. As a homeowner, you have to find someone to watch the house, maintain the lawn, and maybe even manage your mail. As a renter, I turn off the AC, lock the door, and I'm gone. No worries, no extra costs. It’s that simple.

Community and Networking

Living in an apartment complex means I have easy access to common areas and workspaces. I've met some incredible people, made new friends, and even expanded my professional network just by hanging out in these shared spaces. Try doing that in a suburban neighborhood where everyone stays behind closed doors. Community living offers social and professional opportunities that owning a home just doesn’t.

The Numbers Don’t Lie

The numbers don't lie! In the 50 largest U.S. metros, it's officially cheaper to rent than to buy. According to Realtor.com, renting a starter home in places like Austin can cost you 141.5% less per month than owning one. That’s over $2,000 extra every month just to own a home! Zillow research is also showing the same trend!

Leveraging Cash Flow

Instead of pouring money into a mortgage, property taxes, and home maintenance, I channeled that $2,000 monthly savings into high-yield investments. Small multifamily properties—duplexes, triplexes, fourplexes—are where the magic happens. They offer substantial returns and are perfect for beginners.

Consistent High Returns

With small multifamily properties, I enjoyed annual returns of 10-22%. By reinvesting those returns and expanding my portfolio, my wealth grew rapidly. The best part? I spent maybe a couple of hours a month managing my properties, thanks to property managers who handle the dirty work.

Hypothetical Wealth Growth Scenarios

Let’s break it down. Two scenarios over 30 years:

1. Homeownership with a 4% annual equity increase on a $500,000 house. We will put down $100,000 (20%) at year zero and pay the mortgage down as agreed over 30 years.

2. Investing in small multifamily rentals with an initial $100,000 investment (the same as the home downpayment), yielding 15% annual returns, plus an additional $2,000 per month that would’ve gone to a mortgage.

Here’s how the numbers stack up in 5-year intervals:

**An Important note: Around year 15, it is nearly impossible to scale a small multifamily portfolio quickly enough to keep up with the compounding cash flow growth. Most investors switch to passive apartment syndication investing after their first 7-10 small multifamily rentals. More on that in a minute!

Breaking Down the Results

Homeownership (4% Annual Equity Increase)

In this scenario, the homeowner’s property appreciates at an annual rate of 4%. Over 30 years, this results in decent home equity. But here’s the kicker: that equity stays locked in the property. It can’t be reinvested or compounded. Sure, the appreciation adds value, but it doesn’t leverage the power of compound interest.

Small Multifamily Rentals (15% Annual Returns)

Investing the initial $100,000 into small multifamily rentals yields an average return of 15% per year. Plus, investing an extra $2,000 per month that would’ve gone towards a mortgage supercharges the portfolio growth. These returns are reinvested and compounded over 30 years, resulting in wealth that leaves homeownership in the dust. Compound interest, baby!

Transitioning to Apartment Syndications

Over the past few years, I’ve shifted gears to apartment syndications. Pooling money with other investors to buy large apartment complexes has been a game-changer. Here’s why:

• Higher Returns: Average returns of 12-18% per year.

• Minimal Management: Pro property managers handle everything.

• Diversification: Investing in larger properties spreads risk across multiple units and locations.

• Cash-out Refinance: This is the coolest part! At about year 3, most of my deals have a cash-out refinance event. We refinance the property at a higher value (due to all the improvements and increased cash flow) and get between 40-70% of our initial investment back from the refi. However, we also keep ALL OF OUR INITIAL INVESTMENT in the deal until we sell it around year 5. I get to reinvest the cash-out refinance money in another deal while keeping all of my initial money in the first deal. It's LEGAL double-dipping!

Conclusion

The numbers don’t lie. Renting and strategically investing those saved funds into small multifamily properties can massively outperform the traditional homeownership model. Leveraging high-yield investments and the power of compound interest unlocks a level of financial freedom and wealth growth that home equity just can’t match.

Renting isn’t just a fallback plan; it’s a strategic choice for financial flexibility, higher returns, and peace of mind. As a renter, I get to seize new opportunities and grow my wealth without the shackles of homeownership.

So, take a hard look at your financial goals. Are you maximizing your investment potential, or are you stuck in the traditional homeownership trap? Consider the benefits of renting and investing strategically. Financial freedom and significant wealth growth are within your grasp!