Rent vs. buy
A year-by-year comparison of owning and renting the same kind of home, with every assumption on the page so you can test your own.
The answer depends heavily on home-value growth and investment returns, which nobody can predict. Try a pessimistic and an optimistic case.
Year by year
| Year | Cost to own | Rent paid | Owner net worth | Renter net worth |
|---|---|---|---|---|
| 1 | $36,474 | $26,400 | $70,359 | $106,674 |
| 2 | $36,780 | $27,192 | $85,288 | $121,595 |
| 3 | $37,095 | $28,008 | $100,816 | $136,762 |
| 4 | $37,420 | $28,848 | $116,970 | $152,172 |
| 5 | $37,754 | $29,713 | $133,782 | $167,821 |
| 6 | $38,098 | $30,605 | $151,285 | $183,705 |
| 7 | $38,453 | $31,523 | $169,513 | $199,821 |
| 8 | $38,818 | $32,469 | $188,504 | $216,162 |
| 9 | $39,195 | $33,443 | $208,296 | $232,722 |
| 10 | $39,582 | $34,446 | $228,931 | $249,494 |
How this is calculated
Both households start with the same cash: the down payment plus closing costs to buy. The renter invests that money instead.
Each year we add up the cost to own (mortgage payments, property tax and maintenance on the current home value, insurance and HOA) and the rent. Whoever spends less that year invests the difference at your investment return.
Owner net worth = home value after the selling costs you enter − remaining loan balance + the owner’s invested savings. Renter net worth = the renter’s invested savings.
Buying “comes out ahead” in the first year owner net worth is at least the renter’s. We ignore income taxes on investment gains, the mortgage-interest deduction and capital-gains exclusions, which can shift the result.