Renting Can Build Wealth

You've heard it from friends, family, and whoever calls themselves a financial expert on social media - renting is just throwing money away. It'll make you poor. Real adults own homes.

These people are saying that because it's all they know. Chances are they've never done the math. Or they need homeownership as a form of forced savings because they're terrible with money otherwise. Either way, they're not your financial advisor.

Here's another angle - renting can build wealth. In fact, the bulk of our investment portfolio was built during our renting years from ages 18 to 28. Only 9 of those years actually counted, since I didn't start saving for retirement until 19. And once you eliminate the years I spent in school and had minimal investments (another 5 of these years), only 4 years really helped build our current wealth. But let's look at what those 9 years produced and why they mattered more than everything that came after.

Before I get into it. Let me say this - renting doesn't make you poor. Refusing to invest does.

What We Actually Built While Renting

When we bought our first home at 28, I walked in with a low six-figure investment portfolio. That came from starting early, living lean, and continuing to invest through the Great Recession when everything was on “sale”.

At purchase, we pulled our non-taxable savings plus $25,000 from my RRSP through the Home Buyer's Plan. After closing, we had about $90,000 left in our RRSPs, almost entirely in XGRO.

The average annual return on XGRO from July 2014 (when we bought our first home) to now is roughly 6.18% excluding dividends, or 7.41% when you include them. Apply that to the $90,000 and you get approximately $209,000 through compounding alone.

Our portfolio today sits at $337,000. That means in 12 years of homeownership, with all our extra contributions included, we've added about $128,000. That's only 37.9% of our current portfolio. Everything else was built while we were renting.

Why so little growth as owners? Two years after we bought, my wife became a stay-at-home parent. I was supporting three people instead of one. In year one of homeownership, we added nothing beyond my group RRSP contributions because our expenses jumped and it took time to adjust.

Homeownership is expensive in ways people don't fully account for until they're living it.

"But Home Prices Have Gone Up and I Made Money"

Yes. I've heard this a lot over the last 20 years, and there's truth to it. But let's look at actual data. According to the Canadian Real Estate Association (CREA), the average annual rate of home price appreciation in Canada from 2014 to 2026 is about 4.5%. Some markets have done better (Toronto and Vancouver in particular had their runs) but the national average is 4.5%.

XGRO returned 7.41% annually over that same period.

That gap matters. A 4.5% annual return on your home sounds great until you compare it to a simple, low-cost ETF sitting in an RRSP/ TFSA doing nearly 3% better every year with no property taxes, no maintenance bills, no transaction costs eating into your gain when you sell, and no single city concentration risk.

And that 4.5% is the gross price appreciation. It doesn't account for what you spent to own the home during that time, the mortgage interest, the insurance, the repairs, the realtor fees on the way out. Net of those costs, the real return on Canadian real estate looks a lot more modest than the headline number.

Real estate can absolutely build wealth. But so can a boring index ETF and it does it with less friction, more liquidity, and a better historical return over the same window most people are pointing to when they say prices have gone up. Liquidity is key here. I can access and use the funds in my portfolio within 2 business days. If I wanted to access the equity in our home, it might take weeks if not months to borrow against it or sell it.

Renting Is the Most You'll Pay. A Mortgage Is the Least.

This distinction matters more than most people realize. When you rent, your housing cost is fixed and known. That's the ceiling. You budget around it, you invest the rest, and there are no surprises.

When you own, the mortgage payment is just the floor. Add property taxes, home insurance, utilities, maintenance, landscaping, condo fees if applicable, and the occasional furnace, roof, or plumbing bill that shows up with zero warning. You can budget for all of it, but there's always a surprise element that renters simply don't face.

And for years after you buy, ownership is usually more expensive than renting in the same area. In our case, it took about four years for rents in our old neighborhood to catch up to what we were spending on housing. The first two years after that, rents were similar or slightly cheaper than our costs. Then COVID hit and downtown Toronto rents dropped hard. Three years of below-market rents, then another year before they recovered. That's a long runway where renters had a lower cost base, and a real opportunity to invest the difference.

The Investing Delta Is Where Wealth Gets Built

Here's the part that doesn't get talked about enough. If your rent is $2,200 and the equivalent owned home would cost you $2,900 per month all-in, that $700 gap is your wealth-building engine. Invested monthly into a low-cost ETF, that's $8,400 per year. Over 9 years at a 7% average annual return, that's over $100,000.

That's not hypothetical. That's essentially what happened to us, except the math played out across a low-cost lifestyle, consistent contributions, and a willingness to stay invested through a recession.

The key word is invested. The strategy only works if you actually deploy that difference. Renting and spending everything you save on a nicer apartment or lifestyle inflation defeats the purpose. Treat the gap between your rent and what ownership would cost as non-negotiable investing dollars. This takes discipline that many lack. This is why renting gets a bad rep.

One more thing - when you rent, you're not carrying a mortgage. That means your capital is liquid. You can put money into a TFSA or RRSP on your own schedule, respond to market dips, and avoid having your net worth tied up in a single illiquid asset in a single city.

Flexibility Has a Dollar Value

Homeownership creates stability. It also creates gravity. I've been offered opportunities abroad more than once. With a mortgage, that's a complex conversation involving rental income, property management, and a lot of friction. As a renter, it's a lease-end decision.

Same goes for job changes. If the right opportunity is across town or in another city, a renter can move when the lease is up. An owner has to weigh carrying costs, timing the market, and transaction fees that typically run 4-5% of the sale price. This is money that evaporates the moment you list.

None of this means you should never buy. If you're settled, you love where you live, and ownership makes sense for your life then buy. But understand that the flexibility you give up has a real dollar cost that rarely gets factored into the "renting is throwing money away" math.

The Bottom Line

Renting isn't a failure. It's a phase that, managed correctly, can produce more wealth than the early years of homeownership for most people.

Start early. Keep costs fixed. Invest the difference. Don't wait for a mortgage to force you into savings habits you could build right now. And start asking the people who tell you it is a waste of money for actual proof with numbers, not vibes.