Real estate & rental
Real Estate Rent vs Buy Calculator
Compares renting against buying, where the transaction costs decide the break-even.
Result
An arithmetic tool, not financial or legal advice. Lending criteria, tax treatment and tenancy law all vary by state and change regularly. Confirm anything that affects a decision with a lender, an accountant or an attorney. The result swings enormously on two guesses nobody can make reliably: appreciation and rent inflation. It also ignores what the down payment would have earned if invested instead, which in a strong market can exceed the housing gain. Run it with appreciation at zero to see the honest floor.
Get a Free Business AuditHow the calculation works
The total cost of owning over a period, meaning payment, taxes, insurance, maintenance and transaction costs on both purchase and eventual sale, against the total cost of renting over the same period, with the equity built and any appreciation credited to the ownership side. The output that matters is how long you must stay for buying to come out ahead.
What moves the number
- Transaction costs on buying and on selling.
- How long you expect to stay.
- Maintenance, which renting did not require.
- Rent growth against the fixed portion of a mortgage payment.
Where this one goes wrong
Transaction costs on both ends are what create the break-even period, and they are substantial enough that a short stay favours renting even in a rising market. That is the finding most comparisons bury. The down payment's alternative use also belongs in the comparison, since money in a house is not available for anything else, and leaving it out credits ownership with a return it did not have to earn.
Before you quote
- Include transaction costs on the eventual sale, not just the purchase.
- Be honest about how long you expect to stay.
- Account for the alternative use of the down payment.
Where the rules come from
Questions
About this calculator
How long do I need to stay for buying to win?
Long enough to recover the transaction costs on both the purchase and the eventual sale, which are substantial. A short stay favours renting even in a rising market, and that break-even period is the real output of the comparison.
What do rent versus buy comparisons usually leave out?
Maintenance, which a renter never paid, selling costs at the other end, and the alternative use of the down payment. Omitting any of them tilts the comparison toward buying, and omitting all three tilts it heavily.
Does a rising market settle it?
Not on a short horizon, because appreciation has to cover the transaction costs on both ends before it benefits the owner. It also is not guaranteed, and a comparison that assumes a particular rate of appreciation is assuming the answer rather than calculating it.
The formula
net cost of buying = payments and costs paid, less the equity recovered after selling costs
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How to use this calculator
- Purchase price ($). Enter your own figure; the page starts at $420,000.
- Down payment (%). Enter your own figure; the page starts at 20%.
- Mortgage rate (%). Enter your own figure; the page starts at 6.8%.
- Current monthly rent ($). Enter your own figure; the page starts at $2,400.
- Annual rent increase (%). Enter your own figure; the page starts at 3.5%.
- Annual home appreciation (%). Enter your own figure; the page starts at 3%.
The result updates as you type, so you can try a figure, see what it does to buying pulls ahead in, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Purchase price | $420,000 |
| Down payment | 20% |
| Mortgage rate | 6.8% |
| Current monthly rent | $2,400 |
| Annual rent increase | 3.5% |
| Annual home appreciation | 3% |
| Annual ownership costs as a share of value | 2.5% |
| Selling costs | 7% |
| Years to compare | 7 |
What comes out
| Result | Value |
|---|---|
| Buying pulls ahead in main result | 5.0 |
| Net cost of buying | $185,957 |
| Net cost of renting | $224,047 |
| Difference over the period | $38,090 |
| Equity at the end | $175,098 |
Buying pulls ahead in about year 5.0. Over 7 years it costs $185,957 net against $224,047 in rent, a difference of $38,090.
How sensitive the answer is
Holding everything else steady and changing only purchase price, this is what happens to buying pulls ahead in. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Purchase price ($) | Buying pulls ahead in |
|---|---|
| $210,000 | 2.0 |
| $315,000 | 3.0 |
| $420,000 example above | 5.0 |
| $630,000 | 0.0 |
| $840,000 | 0.0 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Purchase price ($)
- A money amount, starting at $420,000.
- Down payment (%)
- A percentage, between 0 and 100, starting at 20%.
- Mortgage rate (%)
- A percentage, between 0 and 20, starting at 6.8%.
- Current monthly rent ($)
- A money amount, starting at $2,400.
- Annual rent increase (%)
- A percentage, between 0 and 15, starting at 3.5%.
- Annual home appreciation (%)
- A percentage, between 0 and 15, starting at 3%.
- Annual ownership costs as a share of value (%)
- Taxes, insurance, maintenance.
- Selling costs (%)
- A percentage, between 0 and 15, starting at 7%.
- Years to compare
- A number, between 0 and 40, starting at 7.
What the results tell you
| Result | What it is |
|---|---|
| Buying pulls ahead in | The headline result. A decimal figure. |
| Net cost of buying | A money figure. |
| Net cost of renting | A money figure. |
| Difference over the period | A money figure. |
| Equity at the end | A money figure. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
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