How the comparison works
Both paths start with the same money. The buyer spends the down payment and closing costs on the home; the renter invests that cash instead. Each month, whoever has lower housing costs invests the difference. At the end, the buyer's net worth is the home's value minus selling costs and the remaining loan, plus any investments. The renter's net worth is their investment account.
What tips the balance
- Time: closing and selling costs take years to earn back, so short stays usually favor renting.
- Price-to-rent ratio: where homes cost many years of rent, renting often wins.
- Home value growth vs. investment return: faster appreciation favors buying; higher market returns favor renting and investing.
- Discipline: the renter only comes out ahead if they actually invest the difference.
Frequently asked questions
What does the break-even year mean?
It's the first year in which the buyer's net worth is at least as high as the renter's. Before then, renting comes out ahead under these assumptions.
Why include maintenance?
Owners pay for repairs that renters don't. A common rule of thumb is to budget about 1% of the home's value each year, more for older homes.
Is buying always better in the long run?
Not always. It depends on prices, rents, and returns where you live. Try different growth and return rates to see how sensitive the answer is.