Rent vs. Buy Calculator

Find your break-even year and compare long-term wealth building

Current Situation

Your current monthly rent, or what a comparable apartment costs in your target area.

Market Assumptions

US historical average: ~3–4%/yr. Local markets vary — check Zillow Research for your city.

S&P 500 long-run real average: ~7%. Use 5–6% for a conservative balanced portfolio.

Agent commissions (~5–6%) + transfer costs. Total selling cost is typically 7–9% of sale price.

Results

Year 11 Buying breaks even
$508K Buyer net worth yr 20
$399K Renter net worth yr 20
0107K214K320K427K534KYr 11Yr 1Yr 5Yr 10Yr 15Yr 20Buyer net worthRenter net worth
YearBuyer Net WorthRenter Net WorthBuying Advantage
Year 1$26,997$56,356$-29,359
Year 5$93,297$119,537$-26,240
Year 10$192,853$196,452$-3,599
Year 15$320,009$281,676+$38,332
Year 20$508,357$399,311+$109,046

Model assumptions: rent grows 3%/yr; renter invests the down payment and monthly savings difference at the investment return rate; buyer builds equity through amortization and appreciation; selling costs applied on hypothetical exit.

How the Rent vs. Buy Model Works

Each year the model tracks two people who started with the same cash. The buyer used it as a down payment; the renter invested it. The buyer builds equity through loan paydown and home appreciation but pays transaction costs on exit. The renter invests the down payment and any monthly savings vs. the buyer's costs. The break-even year is when the buyer's net worth first exceeds the renter's accumulated wealth.

Tips & Insights

  • Short stays (under 5 years) almost always favor renting — transaction costs alone (7–9% of sale price) take years to offset through equity gains.
  • The investment return rate for the renter is the most sensitive input. Be honest about your actual investing habits — money sitting at 1% in a savings account changes the outcome dramatically.
  • In high-appreciation markets (5%+/yr), buying can break even in 3–4 years. In flat markets, the renter's invested down payment can win permanently.
  • Rent increases of 3%/yr are built into the model. If your current rent is rent-controlled, renting looks even more attractive than the model shows.

Common Questions

Why does renting win even after 20 years in some scenarios?

This happens when investment returns significantly exceed home appreciation, or when high selling costs eat most of the equity gain. Try raising the appreciation rate or lowering the investment return — that reveals which assumption drives your local market outcome.

Is the mortgage interest tax deduction included?

No. Since 2018, the higher standard deduction means most buyers don't itemize, so the mortgage interest deduction provides no benefit for the majority of homeowners. Omitting it makes the model slightly conservative for buyers.

What if I never plan to sell?

Set 'Years to analyze' to 30 and 'Selling costs' to 0% to see long-run net worth without a simulated exit. The buyer's net worth will reflect equity without the transaction cost haircut, which typically makes buying look better at long horizons.