Rent vs buy calculator
Compares the true net cost of renting and buying over the years you actually stay, counting transaction costs, running costs and the return on a deposit left invested.
Renting is ahead after 7 years
$9,084.00
Buying does not overtake renting inside 30 years on these numbers
- Net cost of buying
- $172,608
- Net cost of renting
- $163,524
- Equity after selling costs
- $391,564
| Deposit | $150,000 |
|---|---|
| Purchase costs | $30,000 |
| Running costs over the period | $78,750 |
| Net cost of buying | $172,608 |
| Net cost of renting | $163,524 |
| Renting ahead by | $9,084.00 |
- Both paths are measured as net cost, so the equity you get back on sale is subtracted from the cost of buying.
- Ignores tax on the invested deposit and any owner-occupier concessions, which vary by country.
On a $750,000 property with 4% purchase costs and 2.5% selling costs, roughly $48,750 of transaction cost has to be recovered before buying is ahead at all.
Side by side
How this is calculated
Net cost, not monthly payment
Comparing rent to a mortgage payment is the classic error, because part of the payment builds equity and part of the cost of owning never appears in it. This measures everything paid out on each path, then subtracts the equity recovered on sale.
buy cost = deposit + purchase costs + payments + running costs − net equityThe round trip costs about 6.5%
Buying costs around 4% of the price in duty, legals and inspections; selling costs about 2.5% in agent and legal fees. On $750,000 that is $48,750 of pure friction, which is why a short hold almost always favours renting.
The deposit has an opportunity cost
A $150,000 deposit invested at 6% instead grows to about $225,600 over seven years. Ignoring that makes renting look worse than it is, so the growth on the un-spent deposit is credited against the rent paid.
rent cost = rent paid − growth on the invested depositWorked example: $750,000 property, $150,000 deposit, held for 7 years
| Price | $750,000 |
|---|---|
| Deposit | $150,000 |
| Rent | $2,600 a month |
| Stay | 7 years |
| Transaction cost | about $48,750 |
|---|---|
| Deposit if invested | about $225,600 |
| Decided by | Years held |
Change the years held and the answer flips. Under about five years the transaction costs dominate; past ten, rent growth compounding against a fixed mortgage usually settles it the other way.
What this assumes
- A 30-year principal and interest mortgage at a constant rate.
- Rent and property values grow at steady annual rates.
- The deposit would otherwise be invested at the stated return.
- No tax on investment growth or owner-occupier concessions.
Where this commonly goes wrong
- Property growth assumptions do most of the work: 3.5% versus 5% on $750,000 over seven years is a swing of about $120,000 in equity.
- Running costs are systematically underestimated — rates, insurance, strata and maintenance typically run 1% to 2% of value a year, not the few hundred dollars people budget.
- Buying with a small deposit usually adds mortgage insurance of several thousand dollars, which is a pure cost and not counted in the price.
Questions
Is it better to rent or buy?
It depends almost entirely on how long you stay. With around 6.5% of the price lost in buying and selling costs, short holds favour renting; past roughly seven to ten years, a fixed mortgage against rising rent usually favours buying.
How long do I need to own before buying beats renting?
Commonly five to ten years, driven by transaction costs and price growth. On $750,000 the round trip is about $48,750, which needs recovering through equity before ownership is ahead on a net-cost basis.
Why is comparing rent to a mortgage payment wrong?
Because part of the repayment is principal, which you keep, and because ownership carries rates, insurance and maintenance of roughly 1% to 2% of value a year that no rent payment includes. The two figures are not the same kind of number.
Does the deposit really have an opportunity cost?
Yes. A $150,000 deposit invested at 6% becomes about $225,600 over seven years. Any comparison that ignores that $75,600 of forgone growth is systematically biased towards buying.
What property growth rate should I assume?
Long-run real growth in most developed markets has been low single digits above inflation, so 3% to 4% nominal is a defensible base case. The result is highly sensitive to this input, so test it both ways before deciding.
What about the non-financial side?
Security of tenure, the freedom to renovate and the discipline of forced saving all favour owning; mobility and lower maintenance favour renting. This tool answers only the money question, which is one input into the decision.
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This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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