Rent vs. Buy Calculator

Is buying always better than renting long-term?

No — it depends heavily on local rent-to-price ratios, how long you'll stay, and what returns you'd get by investing instead. In expensive markets with cheap relative rent (much of coastal California, for example), renting and investing the difference often wins even over 10+ years. In markets where rent is close to a mortgage payment, buying usually wins after 5-7 years because you stop 'renting money' from a bank and start building equity.

Why does the calculator assume the renter invests money too?

Because comparing 'rent payment' to 'mortgage payment' alone is misleading — a buyer also ties up a large down payment that could otherwise be invested. This calculator gives the renter that same down payment (invested in the market) plus any month renting is cheaper than owning, so both paths start from equal cash and get judged purely on which one builds more wealth.

What's a realistic home appreciation rate to use?

US home prices have historically appreciated around 3-5% per year on average over long periods, though this varies enormously by city and decade. Using a rate close to long-run inflation (around 3-4%) is a reasonably conservative default; avoid plugging in recent boom-year numbers (8-15%) as a permanent assumption.

What closing costs and selling costs does this assume?

This calculator assumes 3% of home price in closing costs when you buy, and 6% of sale price in selling costs when you sell (real estate commissions plus fees) — both fairly standard US assumptions. If your market or deal structure is different, treat the results as directionally useful rather than exact.

Does this include tax benefits of homeownership, like mortgage interest deduction?

No — mortgage interest and property tax deductions are excluded, mainly because most US homeowners now take the standard deduction (raised significantly since 2018) rather than itemizing, so the deduction often provides little or no extra benefit in practice. If you know you'll itemize and benefit meaningfully, buying's real advantage will be somewhat larger than shown here.

Why does the 'break-even year' matter so much?

It's the year buying's net worth first overtakes renting's. Transaction costs (closing costs going in, selling costs going out) mean buying almost always looks worse than renting in year 1-2 — you need enough years of equity-building and appreciation to earn that upfront cost back. If you might move in 2-3 years, renting is very often the financially safer choice regardless of other assumptions.

How sensitive is the result to the investment return assumption?

Very. A renter's invested down payment compounding at 7% vs. 4% over 10+ years makes a large difference to the final comparison — this is the single most important number to get right for your own risk tolerance. Use a conservative, diversified long-term average (many planners use 6-7% for stock-heavy portfolios), not an aggressive best-case number.

What if I plan to rent out the home eventually instead of selling?

This calculator assumes you sell at the end of the holding period to realize your home equity. If you plan to keep the property as a rental instead, your real outcome could be better (ongoing rental income, more years of appreciation) or worse (landlord costs, vacancy risk) than what's shown — that scenario isn't modeled here.

Should I use my actual target home's price or an average for my area?

Use your actual target home's price and the actual rent for a comparable home in the same neighborhood — comparing a specific house you'd buy to a generic 'average rent' for the city can give misleading results if that neighborhood's rent-to-price ratio differs from the citywide average.

Why does maintenance cost matter so much in this model?

Because it compounds with home value every year, just like property tax — a 1%/year maintenance assumption on a $500,000 home is $5,000 in year one and grows as the home appreciates. Underestimating maintenance is one of the most common mistakes in DIY rent-vs-buy math; 1-2% of home value per year is a commonly used long-run average for routine upkeep and eventual big-ticket repairs (roof, HVAC, etc.).