"Shark Tank" investor Kevin O'Leary says buying a home only makes sense if you plan to stay long enough for the math to work, arguing that many young adults are better off renting and investing the difference.
O'Leary Pushes Five-Year Rule, Rent Early
In an X post Sunday, O'Leary wrote, "Buying a home only makes sense if you're staying put for at least five years. If you're early in your career, rent close to work. Walk. Save the transit costs and invest them. When you start a family, that's when you shop for a home… Rates today are 6–7%, so you'll buy less house than your parents did, but timing it right matters more than size."
In an attached video clip, he added that buying "makes sense if you’re going to stay there at least five years," but if you're "in a transitional mode, renting is better," especially when you can live close enough to walk to work and invest what you'd otherwise spend commuting.
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Homeownership As A Lifestyle Choice Tied To Stability
O'Leary frames homeownership as a lifestyle call tied to stability. He recommends it when people are ready to start a family and want the consistency of a neighborhood, community support and a school system for their kids. Before that, he says, flexibility matters more than locking into a mortgage.
High Rates, Closing Costs Make Timing Crucial
His five-year rule also reflects the costs of getting in and getting out. According to data by The Mortgage Reports, closing costs on a purchase typically run about 2% to 5% of the loan and selling a home still often brings agent commissions around 5% to 6% of the price.
Since those expenses are front-loaded, buyers usually need several years of equity gains and price appreciation to break even versus renting. Bankrate has also found that, with today's prices and rates, renting is cheaper than buying in most large U.S. metros for would-be first-timers.
Mortgage rates sharpen the trade-off. The average 30-year fixed rate sits near 6.26% this month, well above the sub-4% era, shrinking what monthly payments can buy. As per a CNBC article, which dates back to December 2022, O'Leary has separately advised buyers to clear high-interest debt first and to keep mortgage payments under one-third of after-tax income to avoid financial strain.
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Kevin O'Leary | Photo courtesy: Kathy Hutchins / Shutterstock.com
