What's the most important input?

The price-to-rent ratio (purchase price ÷ annual rent for an equivalent property). Anywhere ≤ 15 strongly favors buying. 15-20 is a true coin-flip. Above 20, renting + investing usually wins over reasonable hold periods. The other big lever is appreciation vs investment return — small differences here compound into huge net-worth gaps over 20+ years.

Why does the rent scenario start by 'investing the down payment'?

Because that's the opportunity cost. If a renter doesn't put $90k down on a house, that $90k can go into index funds instead. Pretending the down payment is 'free money the buyer found' overstates buying's advantage. Without modeling the invested down payment, every comparison would show buying wins — which is the version of this calculator most real-estate-industry sites publish.

What investment return should I use for the rent side?

After-tax return on a low-cost diversified portfolio is typically 5-7% real (above inflation) historically. We default to 6% nominal which is conservative-ish. If you'd actually park the down payment in cash or a HYSA, use 4-5%. If you're invested heavily in equities, 7-8% is defensible. Match the input to what YOU would actually do with the money — not what an aggressive financial advisor might.

What about the tax benefits of owning?

For most homeowners post-2017 the standard deduction ($14,600 single / $29,200 married in 2024) exceeds their itemized deductions including mortgage interest and property tax (which is itself capped at $10k via SALT). So the famed 'mortgage interest deduction' provides zero marginal tax benefit. We deliberately don't model it because it almost never applies. High-income coastal-state homeowners with jumbo loans are the exception — they should adjust the effective interest rate slightly downward.

Does this work for investment property?

No — this calc is for owner-occupants. For investment properties, use the Rental Property Calculator instead. Rental analysis includes additional considerations: rental income, vacancy, depreciation deductions, DSCR for loan qualification, no §121 cap gains exclusion at sale, and active vs passive activity tax treatment.

How do I think about the 'years' input?

Use your most realistic answer to 'when am I most likely to leave this house?' Median US owner-occupant tenure is around 13 years. Be honest — most people overestimate. Buying is a long-horizon bet; if your honest answer is 'less than 5 years' the math almost always favors renting because transaction costs (6% selling + ~3% closing on the original buy) need significant appreciation to recover.

Buy vs Rent Calculator

A real buy-vs-rent answer isn't 'how much cheaper is renting' — it's 'which path leaves me wealthier in N years.' This calc models both, year by year, including the opportunity cost of the down payment the renter gets to invest.

Verdict

Rent + invest wins

Net worth if you BUY

$263,283

Home equity at year 10, net of 6% selling costs

Net worth if you RENT + invest

$282,216

Down payment + closing + monthly savings compounded at your assumed return

Buy vs rent delta

−$18,933

Renting + investing leaves you $18,933 ahead

Break-even year

Never

Buying never catches up to rent + invest in this scenario

Up-front costs

Down payment	$90,000
Closing costs	$13,500
Total cash at close	$103,500
Monthly P&I	$2,275.44

Year by year

Year	Home value	Equity	Buy net worth	Rent net worth	Delta
Year 1	$463,500	$107,524	$79,714	$119,331	−$39,617
Year 2	$477,405	$125,722	$97,078	$135,589	−$38,511
Year 3	$491,727	$144,625	$115,121	$152,283	−$37,161
Year 4	$506,479	$164,265	$133,876	$169,423	−$35,548
Year 5	$521,673	$184,674	$153,373	$187,020	−$33,647
Year 6	$537,324	$205,888	$173,649	$205,084	−$31,435
Year 7	$553,443	$227,945	$194,738	$223,625	−$28,887
Year 8	$570,047	$250,882	$216,680	$242,654	−$25,974
Year 9	$587,148	$274,743	$239,514	$262,181	−$22,667
Year 10	$604,762	$299,568	$263,283	$282,216	−$18,933

What the model assumes

Buy side includes principal + interest, property tax, insurance, HOA, and maintenance reserves. Principal is subtracted from the cost figure because it's equity, not an expense. The home appreciates at your input rate. We assume the §121 personal-residence exclusion wipes capital gains on sale (true for most owner-occupants with 2-of-5-year occupancy), so the "net worth if sold" figure is just equity minus the 6% selling-cost assumption.

Rent side includes monthly rent (growing at your input rate) and renter's insurance. The renter starts with the down payment + closing costs INVESTED at your assumed after-tax return; in years where buying costs MORE than renting, the renter invests the difference too. In years where renting costs more, the renter just absorbs it (savings rate can't go negative).

What the model doesn't capture

The renter actually investing the savings. Most people don't. If the renter spends the saved money, buying wins almost always — even at terrible price-to-rent ratios. The calc gives the renter full credit for disciplined investing; reality is messier.
Optionality. Renting lets you move for a job, downsize cheaply, or relocate after a divorce — buying locks you in. A 5-7% transaction cost on the buy side is a real penalty if your life circumstances change.
Tax deductibility of mortgage interest. For most homeowners post-2017, the standard deduction is larger than itemized deductions including mortgage interest — so the "tax savings of buying" story doesn't actually apply. We don't model it.
Income volatility. A mortgage is a fixed obligation; rent has more variance year-over-year but you can move to cheaper rent if income drops. Different risk profiles.

How to read the verdict

Numbers within ~$5,000 of each other we call a "toss-up" — the difference is well inside the noise of the assumptions. Anything bigger, we declare a winner. The break-even year tells you the earliest point at which buying overtakes renting. If you might sell before that year, rent and invest the difference.

Frequently asked questions

What's the most important input?
The price-to-rent ratio (purchase price ÷ annual rent for an equivalent property). Anywhere ≤ 15 strongly favors buying. 15-20 is a true coin-flip. Above 20, renting + investing usually wins over reasonable hold periods. The other big lever is appreciation vs investment return — small differences here compound into huge net-worth gaps over 20+ years.
Why does the rent scenario start by 'investing the down payment'?
Because that's the opportunity cost. If a renter doesn't put $90k down on a house, that $90k can go into index funds instead. Pretending the down payment is 'free money the buyer found' overstates buying's advantage. Without modeling the invested down payment, every comparison would show buying wins — which is the version of this calculator most real-estate-industry sites publish.
What investment return should I use for the rent side?
After-tax return on a low-cost diversified portfolio is typically 5-7% real (above inflation) historically. We default to 6% nominal which is conservative-ish. If you'd actually park the down payment in cash or a HYSA, use 4-5%. If you're invested heavily in equities, 7-8% is defensible. Match the input to what YOU would actually do with the money — not what an aggressive financial advisor might.
What about the tax benefits of owning?
For most homeowners post-2017 the standard deduction ($14,600 single / $29,200 married in 2024) exceeds their itemized deductions including mortgage interest and property tax (which is itself capped at $10k via SALT). So the famed 'mortgage interest deduction' provides zero marginal tax benefit. We deliberately don't model it because it almost never applies. High-income coastal-state homeowners with jumbo loans are the exception — they should adjust the effective interest rate slightly downward.
Does this work for investment property?
No — this calc is for owner-occupants. For investment properties, use the Rental Property Calculator instead. Rental analysis includes additional considerations: rental income, vacancy, depreciation deductions, DSCR for loan qualification, no §121 cap gains exclusion at sale, and active vs passive activity tax treatment.
How do I think about the 'years' input?
Use your most realistic answer to 'when am I most likely to leave this house?' Median US owner-occupant tenure is around 13 years. Be honest — most people overestimate. Buying is a long-horizon bet; if your honest answer is 'less than 5 years' the math almost always favors renting because transaction costs (6% selling + ~3% closing on the original buy) need significant appreciation to recover.