Why “Smart Money” Is Still on Homeownership

You’ve probably heard people say, “Come to South Dakota for the low taxes, but don't buy a home. The real 'smart money' is renting. It's cheaper there, and it's more flexible.”

It's an enticing idea. It makes the person saying it sound like a financial rebel, a “life hacker” who's found a loophole in the American Dream.

As a real estate broker in South Dakota, I hear it all the time, and I’m here to tell you it's one of the most dangerous, short-sighted financial myths on the market today.

The “smart money” renter argument is not a long-term strategy; it's a short-term illusion that falls apart when you apply real-world math and basic human nature.

Let me run the exact same numbers as the renters, and I’m going to show you why owning a piece of South Dakota is the most powerful financial tool you have.

 

Myth 1: The “Freedom Fund” Illusion

The core of the “renting is smart” argument is the “Freedom Fund.”

So the math goes like this: The average two-bedroom rent in South Dakota is around $1,175. The all-in cost of owning a $350,000 median-priced home (with mortgage, high SD insurance, and our 1.14% property tax) is around $2,724.

The renter says, “Aha! I'm saving $1,549 a month! I'll invest that 'Freedom Fund' in the S&P 500 and be a liquid millionaire.”

It's a beautiful theory. But in reality, people don't actually do it!

That $1,549 “Freedom Fund” has a funny way of turning into DoorDash, a nicer car payment, a few extra trips, and subscription services you forgot you had. It gets absorbed by lifestyle creep. Guess what? That’s just human nature.

Homeownership, on the other hand, is the single greatest wealth-building tool for the average person because it’s automatic, forced savings.

Every single month, part of your mortgage payment—that $1,863 Principal & Interest check—is paying you. You are building equity. You are paying down the loan. It’s a disciplined savings plan that works without you needing superhuman willpower.

The renter's “Freedom Fund” requires perfect, decade-long strategy. The homeowner's equity building just requires you to pay your mortgage. Which one do you think is more likely to build real wealth?

 

Myth 2: “Renting is Cheaper”

Let's talk about that $1,175 rent payment. Where do you think that money is going?

Here's a hard truth: Every renter in South Dakota is paying a mortgage. It's just not their own.

Your landlord isn't running a charity. Your $1,175 rent check is their business plan. It's carefully calculated to cover:

• Their mortgage payment.
• Their property taxes.
• Their homeowners insurance.
• All maintenance and repair costs.
• ...and, on top of all that, a profit.

You're not “throwing money away” on rent... you are actively paying down someone else's asset and funding their retirement.

As a homeowner, your $2,724 monthly payment is a wealth-building investment. You pay $292 for maintenance, but it's on your asset. You pay $333 in taxes, which you can deduct. An approximately $236 for the insurance. You pay $1,863 (assumes 30-yr fixed at ~7% on $280k) to the bank, and a growing portion of that is your equity.

Rent payments don’t build equity for you; they fund someone else’s asset. That matters over the long run, though renting has valid advantages for short horizons or high mobility.

 

Myth 3: The Unbeatable Power of Leverage

The “renting” argument says your $70,000 down payment is trapped cash that could be in the stock market.

This is the single biggest misunderstanding of how wealth is built. That $70,000 isn't “trapped.” It's leveraged.

When you buy a $350,000 home, you don't just own $70,000 worth of it. You control the entire $350,000 asset. This is a power the stock market simply cannot offer the average person.

Let's run the math on appreciation. Pundits will say, “South Dakota home appreciation has slowed to a normal 3%.”

They say this like it's a bad thing.

• If you put $70,000 in the S&P 500 and it goes up 3%, you made $2,100.
• If you use $70,000 to buy a $350,000 home and it goes up 3%, you made $10,500.

That is a 15% return on your $70,000 cash investment. And that’s before we count the equity you built paying down the principal. You are getting the appreciation on the bank's $280,000, not just your own money.

You can't walk into a brokerage and say, “Here's $70,000, now please give me a $280,000 loan so I can buy more Apple stock.” They will laugh you out of the building.

But a bank will do that all day for a house.

 

The Real South Dakota Dream: Hedging Your Future

Here is the final, most important point. It’s the one that guarantees the “renter” argument will always fail in the long run.

Your 30-year fixed-rate mortgage is the most powerful anti-inflation tool on planet Earth.

Your P&I payment of $1,863 is $1,863 today. In 2025. In 2035, it will still be $1,863. In 2045, it will still be $1,863. In 2055, as you make your last payment, it will still be $1,863.

Can you say the same for rent?

What was the average rent in Sioux Falls or Rapid City 10 years ago? What will that $1,175 apartment cost in 2035? Or 2045?

The renter is making a dangerous bet: that their income will always grow faster than their landlord's rent hikes.

The homeowner, on the other hand, locks in their single biggest life expense. As inflation rises, as wages (hopefully) go up, their housing payment becomes a smaller and smaller percentage of their income. They are building wealth, building equity, and building a moat of financial security.

That's the real “smart money” move.

Don't buy into the illusion. Don't pay your landlord's mortgage if you can own a house. The South Dakota “no income tax” advantage wasn't designed to help you save on rent; it was designed to help you build an asset.

Don’t get me wrong, I am all for renting if you have all the means and if that’s your preference. My point is, renting is a short-term calculation. Homeownership is a long-term wealth strategy.

Don't just live in South Dakota. Own a piece of it.