Homeownership: The Ultimate Financial Power Move

Homeownership has always been a core tenet of the American Dream. And no, it’s not just about the white picket fence and a perfectly manicured lawn. It’s because buying a home is one of the smartest ways to use leverage to maximize your financial footprint.

When you buy a house, you’re not just getting a place to live—you’re investing in an appreciating asset that protects you from inflation, builds equity, and compounds your wealth over time. It’s basically the only way most people can borrow hundreds of thousands of dollars at a low interest rate, have someone else (i.e., the housing market) grow that investment for you, and then walk away with a profit—all while you sleep in your own bed.

For most people, homeownership is the single best opportunity to use leverage effectively. Sure, you could dump your money into the stock market, but good luck getting a 6.5% loan to buy shares of Tesla.

And yet, there are always those who’ll try to convince you otherwise.

The Contrarians Who “Hate” Real Estate

Some people love to make this more complicated than it is. You’ll find financial contrarians all over the internet swearing that:

1. “Stocks perform better!” – Yeah, if you’ve got diamond hands and perfect timing.
2. “Your house isn’t an investment!” – Sure, and eating vegetables isn’t a diet.
3. “Just rent and invest the difference!” – Which would be great if rent didn’t go up faster than your Netflix subscription.

Then there’s Grant Cardone, who loves to say, “Never buy a house!” But let’s be honest—he’s just trying to get you to invest in his real estate fund. Nice try, Grant.

Most of these arguments ignore some pretty key factors, like opportunity cost, access to leverage, tax benefits, or the inconvenient reality that no matter what, you have to pay to live somewhere. And guess what? Those prices keep going up, whether you’re renting or buying.

Renting vs. Buying: Let’s Break It Down

Alright, let’s get into the numbers. If you’re going to argue that renting is better, you’ve got to account for everything—rent increases, stock market returns, tax breaks, appreciation, and equity pay-down.

Let’s compare renting and investing the down payment in stocks versus buying a $500,000 home with 5%, 10%, and 20% down payments. Here’s what we assumed:

• Home Price: $500,000
• Appreciation Rate: 4% per year
• Interest Rate: 6.5% fixed
• Stock Investment Return: 7% per year
• Property Tax: 1.25% of home value per year
• Maintenance Cost: 1% of home value per year
• Rent: 5% of home value per year, increasing by 3% annually
• Time Horizon: 30 years

The Numbers Don’t Lie

Here’s how it shakes out:

5% Down Payment:

• Home Equity: $1,622,637
• Stock Investment: $1,300,892
• Net Worth Difference: +$321,745 in favor of Home Ownership

10% Down Payment:

• Home Equity: $1,622,637
• Stock Investment: $1,372,429
• Net Worth Difference: +$250,208 in favor of Home Ownership

20% Down Payment:

• Home Equity: $1,622,637
• Stock Investment: $1,523,107
• Net Worth Difference: +$99,530 in favor of Home Ownership

Other Key Factors

• These numbers are actually quite conservative when you consider the following
  • 7% returns is not a guarantee for stocks, which also come with risk and volatility
  • Rent being 5% of home value annually is ideal, investor’s often look for the 1% role (home should be rentable for 1% of home value per month - meaning 12% is not uncommon)
  • 1.25% property tax is fairly high relative to national average 1-1.1%, and often you are only paying property tax on the Tax Assessed Value (unfixed but often around 70% of true value)
• Your rental is likely not as nice as your home for equivalent funds - so even if you care about quality of life, there is a trade off here. Keep in mind, this calculation assumes rent is substantially less than implied mortgage. Of course, this is often the case and as stated above (regarding 1% rule) investors are generally looking for the opposite - with rent exceeding mortgage to yield cash flow. This means even if you are paying the equivalent amount for rent - you are not likely to be living in the same quality of home. Candidly, this observation was a huge driver in the decision to purchase my first home (story for another day).
• The secret sauce here is ultimately leverage. Notice how the margin of advantage over stock improves as you put down less money? This is because Cash on Cash return looks at what you make on the actual money you put down - as opposed to the total funds invested. There is simply no common mechanism for a regular person (not a bank with the benefit of Fractional Reserves Banking, or Hedge Fund with incredible leverage opportunity) to procure this type of leverage to invest commodities or equities. Real estate is one of a kind.

What’s the Point?

In every scenario, buying the home results in a higher net worth than renting and investing the down payment. Why? Because of the magic of leverage and appreciation. Even with a relatively conservative 4% annual appreciation, the compounded growth on a $500,000 home adds up. And while stocks technically have a higher average return (7%), you’re not getting that same level of leverage.

Plus, if you’re renting, your monthly payment isn’t going towards equity—it’s going straight into your landlord’s pocket. And if that landlord is smart, they’re using your rent to pay off their mortgage, build equity, and enjoy appreciation on an asset you’re paying for.

The Real Deal with Homeownership

Look, this isn’t just about numbers. It’s about financial strategy. Homeownership lets you:

• Lock in your housing cost with a fixed-rate mortgage (while rent keeps climbing).
• Build equity instead of making your landlord rich.
• Grow your net worth with appreciation and equity pay-down.
• Get sweet tax benefits like mortgage interest deductions.

This isn’t just an investment—it’s a wealth-building strategy. And the best part? You’re using the bank’s money to make it happen.

Let’s Get Real

Yeah, sure, you could find edge cases where renting makes sense. Maybe you’re in an overheated market, or you’re planning to move in the next year. But for most people, most of the time, homeownership isn’t just a good investment—it’s the best one.

This is why historically, homeownership has been a powerful tool for wealth creation in America. It’s also why policies like redlining had such a devastating effect—because they denied entire communities access to one of the most reliable ways to build generational wealth.

A rising tide raises all boats. But if you don’t have a boat, you’re just treading water as it gets deeper below you. And the people who own the boats would love for you to believe that you’re better off without one.

Don’t fall for it. Get a boat. Build wealth. And if you’re lucky enough to already have one, make sure you keep your rate.

Final Thoughts

Don’t overthink it. Homeownership works because it leverages other people’s money, protects you from inflation, and grows your net worth. Whether you’re paying down your mortgage or riding the wave of appreciation, you’re building an asset that pays you back.

You can listen to the Grant Cardones of the world, or you can look at the data and make your own call. Just don’t let anyone convince you that you’re better off treading water while they float by on their yachts.