Rent vs Buy Calculator
Compare the true cost of renting versus buying a home. See which option builds more wealth over your time horizon.
Property & Rent
Enter the home price and comparable rent
💡 Price-to-rent ratio: 17x
Why this matters
The price-to-rent ratio quickly shows market conditions. US average: 15-20x. Expensive cities (SF, NYC): 25-40x. Midwest: 10-15x.
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The Big Question: Rent or Buy?
"Should I rent or buy?" is one of the most important financial decisions you'll ever make. And despite what your parents or real estate agents might tell you, there's no universal right answer.
The truth is: sometimes renting is the smarter financial move. Sometimes buying is. It depends on your specific situation.
The old saying "renting is throwing money away" is a myth. When you rent, you're paying for flexibility, zero maintenance costs, and the ability to invest your down payment elsewhere.
The True Cost of Buying
Buying a home involves far more than just the mortgage payment:
Upfront Costs:
- Down payment (typically 10-20% of home price)
- Closing costs (2-5% of purchase price)
- Moving costs
Ongoing Costs:
- Mortgage payment (principal + interest)
- Property taxes (0.5-2.5% of home value annually)
- Homeowner's insurance (0.3-1% of home value)
- Maintenance & repairs (1-2% of home value annually)
- HOA fees (if applicable)
- Utilities (often higher than renting)
Hidden Costs:
- Opportunity cost of down payment (could be invested elsewhere)
- Transaction costs when selling (5-6% in agent fees alone)
- Less mobility (can't easily relocate for jobs)
The True Cost of Renting
Renting is simpler but has its own considerations:
Costs:
- Monthly rent
- Renter's insurance (typically $15-30/month)
- Security deposit (usually refundable)
Benefits Often Overlooked:
- No maintenance responsibility
- Freedom to invest your would-be down payment
- Flexibility to move for opportunities
- No exposure to housing market downturns
- Lower upfront costs
If you would have put $80,000 down on a home but instead invested it at 7% annual return, after 10 years you'd have approximately $157,000.
The Break-Even Point
The break-even point is how long you need to stay in a home for buying to make financial sense over renting.
Factors that shorten the break-even period:
- Higher rent in your area
- Lower mortgage rates
- Strong home appreciation
- Lower property taxes
Factors that lengthen the break-even period:
- High home prices relative to rent
- High mortgage rates
- Expensive maintenance/HOA
- Low or negative home appreciation
In most markets, the break-even point is 5-7 years. If you're not confident you'll stay that long, renting often makes more sense financially.
The Price-to-Rent Ratio
A quick way to compare buying vs renting in any market:
Interpretation:
- Under 15: Buying is likely better
- 15-20: Could go either way
- Over 20: Renting is likely better
Example: A $400,000 home vs. $2,000/month rent
- Annual rent = $24,000
- Ratio = 400,000 ÷ 24,000 = 16.7 (borderline)
Beyond the Numbers
Money isn't everything. Consider these non-financial factors:
Reasons to Buy:
- Stability and putting down roots
- Freedom to renovate and customize
- Building community ties
- Forced savings (building equity)
- Pride of ownership
Reasons to Rent:
- Career flexibility and mobility
- Uncertain life plans
- Not wanting maintenance hassles
- Testing a new neighborhood
- Saving for a larger down payment
Common Mistakes to Avoid
- Ignoring opportunity cost — Your down payment could grow significantly if invested
- Underestimating maintenance — Budget 1-2% of home value annually
- Assuming home prices always rise — They don't (ask anyone who bought in 2006)
- Buying too much house — Just because you qualify doesn't mean you should
- Ignoring transaction costs — Selling costs 6-10% of sale price
- Emotional decision-making — Don't let FOMO drive a major financial decision