Never Plan to Own a Home? Here's What You Can Do to Come Out Ahead Financially as a Renter

"You're throwing your money away."

"You're just paying another person's mortgage."

These are some of the warnings that are often hurled at people who rent a home instead of owning one. And while some of those warnings may be well-intentioned, frankly, they're bogus.

The truth is that owning a home has its perks. And a big one is that once you've paid out your full obligation to your mortgage lender, your home is yours to own outright. Also, home values do have the potential to rise over time. So it's conceivable that you might buy a home for, say, $200,000, only for it to be worth $1 million by the time you go to sell it.

But rest assured that even if you opt to rent a home for the rest of your life, your finances aren't doomed. In fact, with the right strategy, you can come out ahead financially and perhaps wind up better off than you would have if you purchased a home yourself.

It's all about putting your money to good use

Homeownership can often be a lot more expensive than renting because you're covering not just a mortgage, but also expenses like property taxes, maintenance, and repairs. When you rent, your costs are more predictable -- at least within the confines of each lease you sign. There are no surprise repairs to worry about. You write your landlord the same check every month and call it a day.

Now, if you're a lifelong renter, you're not going to get anything back from your various landlords at the end of the day -- whereas if you own a home, after years of mortgage payments, a valuable asset will be in your possession. However, as a renter, you can take advantage of the fact that you're not covering the many costs of homeownership and can put that extra money to good use.

Because you're renting, maybe you're not spending $500 a month on property taxes and upkeep like some of your homeowner friends are. So let's say you decide to invest that $500 a month over 30 years -- the amount of time it commonly takes to pay off a home in full.

Over the past 50 years, the stock market has rewarded investors with an average annual 10% return. If you're able to snag that same return in your brokerage account, after 30 years, you'll end up with a portfolio worth about $987,000. That's not too shabby.

Your finances are far from doomed

In our example, we see that not owning a home could lead to gain of $807,000. We get that number by taking our total of $987,000 but subtracting the $180,000 you would've put in over 30 years ($500 a month x 12 = $6,000, and $6,000 a year x 30 = $180,000).

Now, let's compare that to someone who buys a home for $200,000, pays off their mortgage in 30 years, and eventually sells their property for $1 million. In this example, that homeowner is looking at an $800,000 gain -- but only on paper. That's because to gain $800,000, that same homeowner had to spend thousands of dollars on an annual basis to cover mortgage payments, maintenance, and other costs.

Of course, these are just a couple of possible scenarios. It's possible to buy a cheap home in a market that then gets hot, so that your initial $200,000 house purchase eventually yields you $2.5 million.

The point, however, is that if you decide that renting is a better bet for you than owning, it doesn't have to mean you won't have any wealth to show for it in the end. If you take the money you aren't spending on homeownership costs and put it to work, you can do remarkably well for yourself.