Rent vs Buy Guide
The 5-Year Rule
Generally, buying only makes financial sense if you'll stay 5+ years. Transaction costs (closing, selling) eat into short-term gains.
What This Calculator Shows
- Monthly cost: Your out-of-pocket each month
- Net wealth: What you'd have after selling (buy) or from investments (rent)
- The difference: Which option leaves you better off
Hidden Costs of Buying
- Closing costs (2-5% of price)
- Maintenance (1% of value per year)
- Property taxes (varies by state)
- Selling costs (5-6% agent + closing)
- Opportunity cost (down payment not invested)
Hidden Costs of Renting
- Rent increases (often 3-5% per year)
- No equity building
- Less control over living situation
- No tax benefits (mortgage interest deduction)
When Renting Wins
- Short time horizon (<5 years)
- High price-to-rent ratio (20x+ annual rent)
- Strong investment discipline
- Volatile or declining market
When Buying Wins
- Long time horizon (7+ years)
- Low price-to-rent ratio (<15x annual rent)
- Strong appreciation market
- Low interest rates