This 32 year old gave up on homeownership in LA where ‘even a modest condo costs close to $1M’ – but he realized renting isn’t the worst. How to build wealth in America without real estate

Rent as a wealth-building strategy

Ochart landed on a one-bedroom apartment in Beverly Hills for $2,100 a month. That may still sound expensive, but it’s well below what a mortgage payment would cost, and money that would’ve gone toward a down payment and a hefty mortgage can instead go straight to work through market investments.

Homeownership has long been seen as a cornerstone of the American dream and a primary way to build wealth. But as Ochart discovered, it’s not the only way to achieve financial success. In fact, financial experts argue that renting can be a smart financial move – especially in high-cost markets like Los Angeles – if the savings from renting are invested wisely.

One key to building wealth while renting is consistently investing the money you would have spent on a down payment or high mortgage payments. Renters can take advantage of compound growth over time by investing in retirement accounts, stocks, and bonds. For example, contributing the maximum annual amount to a 401(k) over several decades can result in a sizable retirement nest egg and outpace a home’s appreciation.

Another advantage of renting is flexibility. Renters aren’t tied down to a single property or market, which can be a benefit in uncertain economic times. They can move to different cities or neighborhoods based on job opportunities or lifestyle changes without the financial burden of selling a home.

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The reality of LA’s housing market

Los Angeles has long been a desirable place to live, but its appeal comes with a steep price. The city’s housing market has become increasingly difficult to navigate, especially for first-time buyers. According to Redfin, the median sale price of homes in the city has jumped from nearly $750,000 to nearly $1 million in five years. Cities like San Francisco, New York, and Miami have experienced similar spikes.

For many young professionals like Ochart, the prospect of saving up for a down payment, managing the monthly mortgage payments, and dealing with the inevitable costs of homeownership is enough to put them off the idea entirely.