Why renting a home cost more than owning one
Published on
Sep 02, 2025
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Home Equity
- Landlords Build in Profit Rent isn’t just covering the mortgage — it also has to include the landlord’s profit margin. They also charge extra to cover vacancies, property management, insurance, and repairs.
- No Equity for Renters When you pay rent, 100% of the money is an expense. A homeowner’s mortgage payment, however, partly goes toward equity (ownership of the house), which is like a forced savings account.
- Historically, real estate tends to rise in value over the long run. In the U.S., homeowners may deduct mortgage interest and property taxes. Selling a primary home often comes with capital gains tax exclusions (e.g., up to $250k or $500k for couples).Even modest appreciation (e.g., 3% per year) can add up to hundreds of thousands of dollars over decades.
- Higher Risk = Higher Cost Landlords take on the financial risk (repairs, tenant turnover, property damage). They price rent to make sure they’re protected from those uncertainties.
- Market Dynamics In hot markets with limited supply, landlords can charge more than the equivalent mortgage payment because demand is so high. Renters are competing with each other for scarce housing, driving rents up.
- Upfront vs. Ongoing Costs Owning seems cheaper month-to-month, but buyers face big upfront costs (down payment, closing fees, inspections, taxes). Many renters don’t have those savings, so they end up paying higher rent instead of buying. The Wiley Group LLC can remove barriers to home ownership. Call us today to find out more.
