Many young professionals are seemingly content to rent simply for the privileges of obtaining a certain “lifestyle,” despite the potential for lost wealth down the road.

A 2021 survey of rental applicants found 39% had individual incomes above $50,000, the highest level in five years. While some of these renters were priced out of higher-priced housing markets, the results also showed a marked increase in the number of well-paid Millennials (aged about 28 to 43) choosing “lifestyle renting” over buying.

Lifestyle renters are defined as renters with above-average incomes using their larger budgets to rent amenities in fancier apartments.

It is like a flashback to a decade ago, when analysts troubled over the same generation’s younger selves. Just like they did at ages 18 to 33, they’re renting because they want to, not because they must.

But while their younger versions were mostly concerned about freedom and flexibility, this more monied version is motivated by stuff. They don’t want to hear about building wealth. They want a doorman and a private gym.

The lifestyle afforded by buying something they can afford just doesn’t live up to their standards.

But is renting a nice pad better than buying right now? It depends a lot on your individual circumstances. Even though they’re trending upward, mortgage rates are still near historic lows.

One rough rule of thumb is that if you don’t plan on staying in the home or area a long time (longer than say 3-5 years), renting might be the better option. You avoid the closing costs, down payments and property taxes.

A significant downside of renting is the loss of real estate appreciation, which varies based on location and market conditions, but tends to average 4% over the long term (home equity increased significantly faster during the pandemic housing boom).

Even for the most modest of two-bedroom apartments today, you’ll spend more than half a million dollars on rent ($1,500 a month for 30 years comes to $540,000), and wind up owning nothing. Or you can buy a house and spend the same amount paying down the mortgage.

Historically, the house will appreciate over time, creating a liquid asset you can sell. You can also continue to live in the home, and use the equity to leverage loans for projects, purchases or retirement.

Simply put, real estate is an asset when you own it and merely an expense when you rent it.

Renting can also be a good home shopping strategy. Renting close to a desirable home market can be an effective way to wait until the perfect opportunity to buy comes along.

See a financial professional to see what solutions work best for you. Drop by, email or call your trusted Bay Equity lender to talk about your home financing options.

In the end, it’s a personal choice - and it’s not only about money, but how you want to live your life.