GetToolr

How to Use This Calculator

Enter your current rent and a comparable home price on each side. Adjust the assumptions section with your local property tax rate, expected appreciation, and how long you plan to stay. The calculator models both scenarios year by year, including the opportunity cost of investing your down payment in the stock market instead.

Calculator

Rent vs Buy Calculator

Compare the true cost of renting versus buying, including opportunity cost of your down payment.

Renting wins over 7 years

by $8,232 in net worth.

$8,232

Renting

$
%
$/mo

Buying

$
%
%

Assumptions

yr
%/yr
%/yr
%
%/yr
%
%
%
$/mo

Year-by-Year Comparison

YearRent CostBuy CostHome EquityRenter Net WorthBuyer Net Worth
1$21,780$26,034$83,413$90,687$61,783
2$22,428$26,283$97,349$101,159$75,070
3$23,095$26,541$111,830$111,926$88,882
4$23,783$26,808$126,882$122,999$103,246
5$24,491$27,086$142,533$134,386$118,188
6$25,220$27,375$158,810$146,098$133,735
7$25,972$27,675$175,743$158,147$149,916

At Year 7

Home Value$430,456
Home Equity$175,743
Buyer Net Worth$149,916
Renter's Portfolio$158,147

Total Cost

Renting (7 yr)$166,769
Buying (7 yr)$268,302

Opportunity Cost

If you rent and invest your $70,000 down payment + monthly savings at 7%/yr:

$158,147

portfolio value at year 7

What Actually Matters in the Rent vs Buy Decision

Time horizon is everything

The single biggest factor is how long you plan to stay. Buying has high upfront costs (closing costs, moving, furnishing) that take years to recoup through equity building. If you stay less than 5 years, renting almost always wins financially. At 7+ years, buying usually pulls ahead.

Opportunity cost of the down payment

Most rent-vs-buy calculators are biased toward buying because they ignore this. A $70,000 down payment invested in an S&P 500 index fund at 7% average annual returns grows to about $98,000 in 5 years and $134,000 in 10 years. That is real money you give up when you lock it into a house.

Maintenance is the hidden cost of ownership

Homeowners should budget 1-2% of the home value per year for maintenance. On a $350,000 home, that is $3,500-7,000 annually. This includes things renters never pay for: roof repairs, HVAC replacement, plumbing issues, appliance failures, and landscaping. These costs are often underestimated by first-time buyers.

The real advantage of buying

The financial models can go either way depending on assumptions. The true advantage of buying is forced savings through mortgage payments that build equity, plus protection from rent increases. Many people who could theoretically build more wealth by renting and investing simply do not have the discipline to invest the difference consistently.

How Markets Differ

The rent-vs-buy equation varies dramatically by city. In San Francisco, where median home prices exceed $1.2 million but rents are relatively lower, the price-to-rent ratio is above 25, heavily favoring renting. In cities like Detroit, Memphis, or Cleveland, where price-to-rent ratios are below 12, buying is almost always the better financial choice.

Favor Buying

Ratio < 15

Midwest, Southeast, and secondary markets. Cities like Indianapolis, Memphis, Cleveland, Birmingham where home prices are low relative to rents.

Favor Renting

Ratio > 20

Coastal metros like San Francisco, New York, Los Angeles, Seattle where prices have outpaced rents significantly.

Frequently Asked Questions

Is it better to rent or buy in 2026?
It depends on your market, how long you plan to stay, and your financial situation. In most markets, buying becomes cheaper than renting after 5-7 years due to equity building and rent increases. However, in expensive coastal markets with high price-to-rent ratios (above 20), renting and investing the difference can build more wealth.
What is the price-to-rent ratio?
The price-to-rent ratio is the home price divided by annual rent. Below 15 generally favors buying, 15-20 is a toss-up, and above 20 generally favors renting. For example, a $400,000 home that would rent for $2,000/month has a price-to-rent ratio of 16.7 ($400,000 / $24,000).
What is opportunity cost in the rent vs buy decision?
Opportunity cost is what you could earn by investing your down payment and monthly savings in the stock market instead of putting it into a house. If you would put $70,000 down on a house, that same $70,000 invested at 7% annual returns grows to about $134,000 in 10 years. This is the hidden cost of buying that most simple calculators ignore.
How long do I need to stay for buying to make sense?
Generally 5-7 years is the breakeven point where buying becomes cheaper than renting, after accounting for closing costs, maintenance, and opportunity cost. If you plan to move within 3 years, renting almost always wins because closing costs (3-6% to buy and sell) eat into your equity.

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