Financial educator JL Collins—known as the “Godfather of Financial Independence”—is advising millennials and younger generations to rent instead of buy a home.
In a recent conversation with Hasan Minhaj, Collins said, “If building wealth is your key goal, then, no, owning a house is not going to contribute to that.”
However, many financial experts and real estate investors strongly disagree with his advice—especially as mortgage rates finally start to come down.
Why Collins claims a house is a terrible investment
In Collins’ opinion, a house is a major financial burden.
“When you invest in house, you’re taking on enormous expenses,” he said—including your mortgage, real estate taxes, insurance, maintenance, repairs, remodeling expenses, furniture, and appliances.
For this reason, Collins claimed your house is not really an investment at all.
“Your house is a terrible investment because it’s basically not an investment,” Collins said. “You shouldn’t think of your house as an investment. Sometimes it works out, goes up in value, but it’s a place to live.”
Collins said he told his own daughter, who’s in her early 30s, to invest in Vanguard Total Stock Market Index Fund Admiral Shares and to rent instead of buying a home.
Because she took his advice, he said she was able to quit her corporate job last fall.
“She can make that kind of bold decision because she didn’t make any silly decisions like buying a house and becoming house poor and being dependent on a paycheck to pay for all of those things,” he said.
According to Collins, if you want to own a house because it will provide a certain lifestyle that you find desirable, such as a yard for your kids, then that’s great. “But that’s a lifestyle decision—it’s not a financial decision,” he claimed.
Why other experts say real estate is a good investment
One person who strongly disagrees with Collins’ opinion is real estate agent and investor Jarrod Duncan of Coldwell Banker Warburg. “I bought my first house at age 26,” he said. “It was a foreclosure, and I was able to improve it and increase the value over time.”
Duncan said that after building equity in that home, he was able to leverage that into the ability to buy more properties. “I now own close to 20 single-family homes that not only give me rental income but have increased my wealth significantly,” he explains. “I still think it’s important to diversify, but real estate is a steady and great way to build long-term wealth.”
Real estate investor Derrick Barker, CEO and co-founder of Nectar, wholeheartedly agrees.
“Homeownership is still the biggest way Americans generate wealth,” he said. “I built my first million dollars in my 20s and then the majority of my wealth since then through real estate.”
According to a Realtor.com® analysis, real estate saw an average five-year return of +26% since 1975 as of the end of 2024.
One thing that sets real estate apart is that it is “a physical asset that people always need,” said Erik Nordstrom, principal at Ironridge Capital. “Unlike paper assets, it has practical utility—such as shelter and land use—which gives it enduring value.”
Collins overlooked the fact that rent is money gone for good, while mortgage payments build equity, noted real estate investor J. Ryan Smolarz, founder of STOR Partners.
In fact, typical homeowners have accumulated at least $147,000 in housing wealth in the last five years, according to the National Association of Realtors® in its fourth quarter of 2024 report.
“Collins also overlooks the leverage benefits,” Smolarz said. “With just a 20% down payment, you control a full property and benefit from appreciation on the entire amount, not just your investment.”
Real estate agent and investor Jacob Naig takes issue with Collins calling homeownership a lifestyle choice instead of an investment.
“I’ve had first-time buyers buy a duplex, then live in one side and rent the other,” he says. “Their housing does not cost them a penny, and their equity grows every month. To call that a lifestyle choice downplays the wealth-building impact. Real estate is different in that you can live inside your investment, and that’s a reality financial models don’t capture.”
While index funds might return 10% in a strong year, real estate offers layered benefits, according to Doug Greene, owner of Cash House Closers.
“Those benefits include 4% to 5% annual appreciation,” he said, “plus another few points in principal pay down, more points in forced appreciation, plus more points in tax savings, as well as the ability to convert the property into a rental when your family outgrows it.”
Greene says with real estate, the wealth-building strategies are numerous—unlike renting and only investing in the market, which he feels has a more limited upside.
When he was getting his start, Smorlarz said many people discouraged him from investing in real estate, and advised him to go for the simplicity of an index fund instead. “But I’m glad that I didn’t listen,” he said. “Real estate demands active management, but the returns and flow of cash provide security that index funds just can’t give.”
Real estate investment advice for millennials and Gen Z
Jeff Herman, investment adviser at The Jeffrey Group, offers the following advice for younger generations who are considering investing in real estate.
“You don’t need significant capital to get started,” he says. “In fact, the younger you are, the more time you have to recover from risks, and that allows you to be bold.”
Here are the four strategies he often shares with his younger clients:
Try house-hacking: “Buy a duplex, live in one unit, and rent the other,” he says. “Add a roommate to your half if you want to accelerate savings. This covers your mortgage while building equity.”
Jump on presales: “Developers need early buyers,” he says. “Getting in first can secure a lower price and even property upgrades, boosting resale value once the project is complete.”
Use sweat equity: “Buy properties that need work,” he advises. “By putting in your own time doing demolition, woodwork, and landscaping, you add value and save thousands.”
Partner up: “Work with reputable flippers who need credit partners,” he says. “You provide the credit, they do the work, and you share the profits.”
Over the years, Herman has practiced what he preaches.
“I started in my 20s, buying condos and single-family homes, living in them for a couple of years, then rolling the gains forward, which built significant equity,” he says. “I have now completed more than 75 deals. Real estate remains one of the strongest wealth-building strategies when approached thoughtfully, and I absolutely recommend it.”