Buy vs rent scenario
Buy vs rent over five years: the short-stay test
Selling costs and closing costs are heavy when you stay only five years. This case shows how a short horizon changes the answer.
After 5 years, renting and investing finishes ahead of buying by about $4. On these assumptions buying overtakes renting after about 5.7 years, once selling costs are counted.
Year-by-year results for this scenario
After 5 years, renting and investing finishes ahead of buying by about $4. On these assumptions buying overtakes renting after about 5.7 years, once selling costs are counted. The owner's first-month cash cost is $3,757, compared with $2,325 for the renter.
| Year | Home value | Mortgage balance | Buyer net worth | Renter net worth | Buying minus renting |
|---|---|---|---|---|---|
| 1 | $621,000 | $469,303 | $117,835 | $150,940 | −$33,105 |
| 2 | $642,735 | $458,120 | $149,966 | $176,418 | −$26,452 |
| 3 | $665,231 | $446,428 | $183,341 | $202,855 | −$19,514 |
| 4 | $688,514 | $434,203 | $218,008 | $230,289 | −$12,281 |
| 5 | $712,612 | $421,423 | $258,759 | $258,763 | −$4 |
Questions people ask
Does buying beat renting in this scenario?
After 5 years, renting and investing finishes ahead of buying by about $4. On these assumptions buying overtakes renting after about 5.7 years, once selling costs are counted.
What changes in this scenario?
Selling costs and closing costs are heavy when you stay only five years. This case shows how a short horizon changes the answer. All other inputs keep the calculator’s default planning values.
Is this a forecast?
No. It is an illustration of how one assumption changes the buy vs rent comparison. Replace the inputs with your own numbers.
Other buy vs rent scenarios
- 5% down, 30-year amortization
- 20% down, ten years
- Seven-year stay
- Fifteen-year stay
- Full amortization
- Rates at 6.5%
- Rates at 3.5%
- 4.5% now, 7% at renewal
Educational illustration; not advice. See the assumptions.