Yes, You Can Build Wealth Without Owning a Home

You need to own assets. You don't have to live in them.


Ben LeFort

2 years ago | 6 min read

You need to own assets. You don't have to live in them.

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It’s time we stop fetishizing homeownership.

Homeownership has long been associated with “The American Dream.” I think it’s time we completely disconnect homeownership from living some kind of dream life. Back when most people had a Defined Benefit pension, having a paid-off mortgage meant you probably had a pretty solid life in retirement.

Those were also times when you could afford to buy an average house on an average salary. Those days are gone, and it’s time we move on to a new narrative. To quote Kylo Ren: “Let the past die. Kill it if you have to.”

Instead of associating The American Dream with homeownership. Let’s redefine it as owning enough financial assets to let you provide for your family and eventually make work optional regardless of whether you own or rent your home.

Yes, owning a home can help many people build wealth

Owning a home helps build wealth in four ways.

1. You own an asset.

As much as I would like it if people wanted to invest in the stock market as badly as they want to own a home, that is not the reality we live in.

The fact is that when many people buy their first home, that house is their first asset outside a checking account.

Is it the best asset to own?


But, despite what the Rich Dad, Poor Dad crowd will tell you, a house is an asset.

We tend to overthink things, so let’s keep this simple. If you want to build wealth, you’ll need to start acquiring assets, and the sooner, the better.

2. Owning a home creates forced savings.

While people are generally bad at saving, they are amazing at making their mortgage payments.

It’s easy for us to imagine what it would feel like to lose our home. As a result, most people will do whatever it takes to make their mortgage payments every month.

Every time you make a mortgage payment, a part of that payment goes towards paying the principal of your mortgage. And every dollar of principal payments increases your net worth by a dollar.

3. A paid off mortgage= risk-free income

In chapter 13 of the rational investor, I discussed how homeownership fits into an investment portfolio.

A paid-off mortgage is like receiving tax-free income from a bond. If your mortgage payment was $1,500, paying off that mortgage is no different than receiving $1,500 per month in tax-free and risk-free income.

That not only frees up more money for you to invest, but all else being equal, a paid-off mortgage increases your capacity to be more aggressive in your investment portfolio.

4. Home prices have the potential to go up

As demand for housing has rapidly increased over the decades, so have the values of homes. This has made many middle-class workers who own their homes wealthier.

While I never count on the price of my home increasing, when it does, it is a pleasant surprise and accelerates the wealth-building process.

There are many people who have become millionaires simply by buying a house and paying the mortgage off over a 30-year period while the value of the home continues to rise.

The Financial risks and downsides of homeownership

Here are four reasons homeownership is not an automatic ticket to your dream life.

1. Homeownership is risker than you think

Before the financial crisis, nearly everyone believed that it was a fact of life that house prices in America would always go up every year. While the events of 2008–2009 disproved that belief, houses are still considered a safe investment.

That belief is backed up by the research from the Federal Reserve, which found the standard deviation of global real state returns was roughly half the standard deviation for global stocks.

Translation: houses have roughly half the volatility as a portfolio of stocks.

But remember, putting 100% of your money in stocks is very aggressive and risky. Housing being less risky than a 100% stock portfolio does not make it “safe.”

Buying a house involves risk.

The question is, how much risk?

That question was answered in a 2017 paper titled “The Home as a Risky Asset,” written by David Blanchett published in the Journal of Personal Finance. Blanchett found that owning a home was equally as risky as a 60/40 portfolio of stocks and government bonds.

Unlike a 60/40 portfolio, owning a home is one of the least diversified investments you can make.

Buying a home means buying a single unit of:

  • A broad asset class; real estate.
  • A subsector of real estate; single-family homes.
  • Single-family home in a particular country.
  • Single-family home in a particular state or province within that country.
  • Single-family home in a particular city within that state or province.
  • Single-family home in a particular neighborhood within that city.
  • Single-family home on a particular street within that neighborhood.

2. Owning a home is expensive

If you think buying a house is expensive, try owning one.

Here are some of the annual costs you will need to budget for as part of your housing costs.

  • Mortgage.
  • Mortgage insurance.
  • Property Taxes.
  • Necessary maintenance (such as reshingling the roof or fixing a broken pipe.)
  • Renovations and upgrades.
  • Homeowners Association (HOA) or condo fees
  • Utility bills.
  • House insurance.

3. Owning a home costs you a lot of time

I own a single-family house with a big backyard.

By boomer-standards, I am “living the dream.”

I’m also a dad, have a 9–5 job, and a side business as a writer. I have very little spare time, and do you know how I am forced to spend the bulk of my spare time? Mowing the lawn, pulling weeds, painting walls, replacing appliances, and other tasks that I absolutely hate but am forced to do as a homeowner.

All of these tasks require time.

Time spent pulling weeds (a task I hate and makes me no money) is time I can’t spend writing newsletters and chapters of my next book (tasks I enjoy that make me money.)

Yes, I could pay someone to do these tasks for me, and it is something I am considering, but that is another added cost — a cost that is baked into the cost of renting, but most homeowners fail to budget for.

If your hourly wage is more than a landscaper’s, then doing yard work means you are losing money and doing a worse job than if you left it to a professional.

4. Homeownership can be a wealth trap

If you’re only asset is a home worth $1.5 million with a $500,000 mortgage, you are a millionaire. But you are not as wealthy as you might think.

The problem is that to access that $1 million and spend it on funding your lifestyle; you have two choices.

  1. Sell your house.
  2. Take out another mortgage.

Both of these options present obvious problems.

  • If you sell your home, you still have to find somewhere to live. That means buying another home or renting. It also means incurring hefty transaction fees.
  • Taking out another mortgage adds to your debt and reduces your monthly cashflow.

Both options add to your monthly expenses and eat away at your equity.

Here’s the financial trap many middle-class homeowners fall into.

When the value of your home increases so does your net worth. This makes you feel rich. But since the majority of that wealth is tied up in the place where you live, the dream of financial freedom has become nothing more than a mirage.

You need to own assets. You don’t need to live in them

Here’s the reality, if you want to build more financial flexibility in your life and one day make work optional, you need to own financial assets, and you need to own assets you don’t live.

That is true whether you own or rent a home.

When I say financial assets, I mean an investment portfolio of assets like stocks and bonds.

The bottom line is that you have to own assets that make money for you while you’re sleeping, or you’ll never be able to stop working yourself.

Owning a house can have financial benefits, but it’s not the only way to build wealth.

If you want to get serious about building a portfolio of financial assets that help you build wealth, you can start reading my book “the rational investor,” where I compile the best financial research in the world to help you build passive wealth.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.


Created by

Ben LeFort

Economic policy researcher by day, personal finance writer by night. I write a 3X weekly newsletter every week to help you use money to live your best life.







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