I'm a homeowner and former financial advisor, and I still think most people would be better off renting

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• I own a home and know it's the right lifestyle choice for me, but it's not the best investment.
• I ran the numbers, and I could be earning hundreds of thousands more by investing in the market.
• The trick for renters is: You have to invest the money you'd otherwise spend on home maintenance.

The case for owning a home is a simple one: You put in a down payment as your initial investment, take out a mortgage, and over time, you build equity as the value of the home grows. Should you decide to sell, you may make a profit. Or, at the very least, you now have an asset to pass down to a family member or a place you can rent out.

Those in the homeownership camp argue that since you need a place to live, it makes more sense to pay a set cost for a defined period of time and gain equity out of the arrangement rather than paying rent indefinitely. It can also be argued that homeowners have the advantage of borrowing against the equity in their home as another important benefit.

However, as a financial professional and homeowner myself, I still see renting as a more conducive and efficient option for investing and building wealth.

How the math can favor renters

My wife and I bought our home, priced at $400,000, in August 2021.

Let's say over the next 30 years that the price of the home appreciates at current historical rates of about 4%. That means that in year 30, the house would be worth $1.3 million for a profit of $900,000. This is how most homeowners calculate their gains on a home — by subtracting the value of the home when they purchased and the value when they sold.

But doing this calculation is incorrect. It doesn't take into account all of the costs of owning the home, including the interest paid during the life of the mortgage loan .

"Many potential homeowners underestimate the costs of ongoing upkeep and repairs. A good rule of thumb is to maintain a cash reserve equal to 1% of your home's price for unexpected bills," says Joel Ohman, a financial planner and CEO of Clearsurance.com.

This low estimate for homeowners can sometimes be hidden and seen as hobbies instead of expenses that should be accounted for. "Most people who invest time and money into landscaping don't think of it as a homeownership cost — but it is," says Jeffrey Zhou, cofounder and CEO of the lending company Fig Loans.

Accounting for the true cost of homeownership in my situation would include the following:

• $562,400 is the total cost of all principal, interest, mortgage insurance , and loan costs, not the $400,000 price of the home when we purchased it according to our actual loan documents
• $120,000 would be the total annual maintenance expense over 30 years using Oshman's rule of thumb, not including large expenses, like HVAC or any remodeling

These two expenses alone add up to $682,400, making our total profit over 30 years $617,000. Using the amounts saved, let's look at how a renter would fare if the upfront costs and maintenance were invested using historical data for the past 30 years.

My wife and I spent a total of $41,000 between closing costs and the down payment. If we invested $41,000 in the S&P 500 in the first year and added what would have been an annual maintenance cost of $4,000 a year, we could have $2,045,485 in 30 years with $1,844,485 in total profit.

In this situation, the renter would have a higher return on investment, with $1.8 million, compared to the homeowner, with just $617,000. Even though the homeowner's payment stops once the mortgage is paid, the return on investment from just the down payment and maintenance expense favors the renter.

Other arguments for and against homeownership

The renter is subject to rising costs indefinitely; the homeowner has one fixed cost

This is true, but even with rising rent each year, it does not impact the initial down payment or maintenance costs that the renter would experience. Also, the renter also has the ability to relocate to cheaper areas to offset those costs.

At the end of 30 years, the homeowner will not have to pay for housing

While the renter will still have to pay for housing indefinitely, in this scenario the renter still has nearly three times more money at year 30 than the homeowner. Also, the homeowner still pays property taxes , which may increase over time, and still has to contend with annual maintenance.

What about the tax benefits?

Once, one of the biggest benefits of owning a home was the ability to deduct the interest on a mortgage. Deducting this cost would increase homeowners' return on investment, but the Tax Cuts and Jobs Act of 2017 nullified most of this benefit.

"Most filers now just use the standard deduction rather than itemizing. When you have a mortgage, the interest is deductible as an itemized deduction. However, since most people use the standard deduction now, the tax benefits of a mortgage are largely lost," says Steven Gilbert, a financial planner and founder of Gilbert Wealth.

Your primary home does not have to be seen as an investment. Just like a car, furniture, and other regular purchases, your home can be seen as a lifestyle purchase that just so happens to appreciate in value depending on your market. Ohman says, "If renting saves money and reduces stress so you can accomplish your financial objectives, it may be the best way to build your net worth. The critical action for renters is to successfully invest the savings they would have spent on a home . "

Don't know where to start? Consider a financial advisor.

Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three fiduciary financial advisors that serve your area in minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. Start your search now.

This article was originally published in November 2021.