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A Plea to Millennials: Build Wealth, Stop Renting

We have talked about it over and over again and we get your reasoning. We get that this generation witnessed their parents suffer through the Greatest Recession in memorable history. We get that this generation has an excess of debt, struggled to get their careers off, has the lower financial assets since the ‘80s and therefore has been off to a slow start financially. But statistics show that only 1 in 3 Millennials own a home and compared to previous generations, it is an underwhelming proportion.

Most importantly, in order to create wealth from this slow financial start, it is imperative to acquire assets (in particular, through homeownership), especially if there is a large opportunity cost in renting vs. buying associated. Some key points are:

  • Most people make the decision to rent on a short term basis, but the years add up and each one is a missed opportunity.

  • In the scenario where a house costs $300,000 to buy versus $1,800 per month to rent, the renter gives up over $38,000 in wealth created in the first year alone ($21.5k in rent paid plus $16.5k in equity created through principle paid plus appreciation and tax deductions).

  • Over 20 years of ownership, the figure grows to over $1M in opportunity cost. The person choosing to purchase a home will have built $448k in wealth (principle paid plus appreciation and tax deductions) whereas the renter simply handed over $580k in rent payments.

There are many scenarios in the major metropolitan areas where this holds true but specific to Denver:

  • Population:2.76M

  • Job Growth:2.0%

  • Forbes Ranking:1 of 199

  • Monthly Housing Costs

  • Purchase:$1,985/mo.

  • Rent:$2,226/mo.

  • Opportunity Costs to Renting vs. Owning

  • 1-year:$47,525

  • 5-year:$255,332

  • 10-year:$550,034

  • 20-year:$1,281,687

To read the full article, click HERE

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