Question 1

How do I decide whether to rent or buy?

Accepted Answer

Compare the total cost of buying (mortgage, taxes, insurance, maintenance) against renting + investing the down payment. If you plan to stay 5+ years and home appreciation outpaces investment returns minus rent increases, buying usually wins.

Question 2

What is the 5-year rule for buying?

Accepted Answer

Generally, buying makes financial sense only if you plan to stay at least 5-7 years. Closing costs (2-5% of home price), moving costs, and slow equity build in early years mean selling earlier often results in a net loss vs. renting.

Question 3

What costs does buying include that renting doesn't?

Accepted Answer

Buying includes: mortgage payments, property tax (1-2% of home value/year), homeowner's insurance, maintenance (1-2% of home value/year), HOA fees, closing costs, and opportunity cost of the down payment.

Question 4

How does home appreciation affect the rent vs buy decision?

Accepted Answer

Home appreciation significantly favors buying. At 3% annual appreciation, a $400K home gains $12K/year in value. At 5%, it gains $20K/year. However, appreciation is not guaranteed — some markets see periods of flat or declining values.

Question 5

What is the opportunity cost of a down payment?

Accepted Answer

The down payment is money you can't invest elsewhere. A $80K down payment (20% on $400K) invested in the S&P 500 at ~10% return would grow to ~$130K in 5 years — that's the opportunity cost of tying it up in home equity.

Year	Home Value	Home Equity	Renter Investments	Advantage
1	$412,000	$95,577	$104,519	-8,942
2	$424,360	$111,753	$117,510	-5,757
3	$437,091	$128,556	$130,998	-2,442
4	$450,204	$146,013	$145,006	+1,007
5	$463,710	$164,155	$159,560	+4,595
6	$477,621	$183,012	$174,688	+8,324
7	$491,950	$202,618	$190,419	+12,199
8	$506,708	$223,007	$206,785	+16,222
9	$521,909	$244,216	$223,818	+20,397
10	$537,567	$266,283	$241,555	+24,728

Year	Home Value	Home Equity	Renter Investments	Advantage
1	$412,000	$95,577	$104,519	-8,942
2	$424,360	$111,753	$117,510	-5,757
3	$437,091	$128,556	$130,998	-2,442
4	$450,204	$146,013	$145,006	+1,007
5	$463,710	$164,155	$159,560	+4,595
6	$477,621	$183,012	$174,688	+8,324
7	$491,950	$202,618	$190,419	+12,199
8	$506,708	$223,007	$206,785	+16,222
9	$521,909	$244,216	$223,818	+20,397
10	$537,567	$266,283	$241,555	+24,728

Rent vs Buy Calculator

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📈 Year-by-Year Comparison

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