Rent vs. Buy
Which option produces higher net worth? A monthly-step decision engine.
Renting
/year
/month
= buyer's down payment + closing costs, invested at 4% market return
Buying
/year
/year
% of home/yr
/month
One-time, added to upfront cash
Tax benefits included (Std vs Itemized auto-compare at 32% rate)
Tax Implications
Year 1 Deduction Breakdown
Capital Gains at Sale (Year 7)
Primary residence exclusion requires 2+ years of ownership & use.
After 7 years
Buy wins by $42,011
Buy net worth: $425,351
Rent net worth: $383,340
Annualized edge: 1.50%
Breakeven: Year 5, Month 12
Cost-Equivalent Home Price
$565,147
At this price, your monthly owner cost matches your $3,530/mo rent
$334,853 below current price
Current: $900,000
Net Worth Over Time
Home Value
$1,145,051
from $900,000
Total Interest
$313,272
Principal: $69,003
Renter Portfolio
$383,340
Invested: $303,585
Tax Savings
$56,571
Married filing
Selling Costs
$68,703
6% at sale
PMI Paid
$0
None
Monthly P&I
$4,551
30yr @ 6.5%
Upfront Cash
$198,000
DP + closing + reno
Year-by-Year Comparison
| Yr | Home Value | Loan Bal. | Tax Saved | Buy NW | Rent NW | Difference | Winner |
|---|---|---|---|---|---|---|---|
| 1 | $931,500 | $711,952 | $8,253 | $163,658 | $223,867 | -$60,209 | Rent |
| 2 | $964,103 | $703,366 | $16,463 | $202,891 | $249,951 | -$47,060 | Rent |
| 3 | $997,846 | $694,204 | $24,621 | $243,771 | $276,244 | -$32,473 | Rent |
| 4 | $1,032,771 | $684,429 | $32,719 | $286,376 | $302,738 | -$16,362 | Rent |
| 5 | $1,068,918 | $673,999 | $40,749 | $330,784 | $329,425 | +$1,359 | Buy |
| 6 | $1,106,330 | $662,871 | $48,703 | $377,079 | $356,295 | +$20,784 | Buy |
| 7 | $1,145,051 | $650,997 | $56,570 | $425,351 | $383,340 | +$42,011 | Buy |
Assumptions & Notes
- Monthly-step compounding for mortgage amortization, rent growth, home appreciation, and investment returns.
- Buy net worth = home value − remaining mortgage − selling costs (6%). Selling costs deducted at every time step.
- Rent net worth = renter's investment portfolio (initial lump sum = down payment + closing costs, plus monthly savings).
- PMI at 0.5%/yr of original loan when down payment < 20%, drops when LTV ≤ 78%.
- Tax savings: mortgage interest (capped at $750k loan) + property tax (SALT cap $40k) vs standard deduction ($30k) at 32% marginal rate.
- Monthly P&I: $4,551 · Upfront cash: $198,000