Rent versus Buy

Questions people ask

Is renting really throwing money away?

No. Renting buys you shelter and flexibility, and the rent is the whole cost. Owning also has costs you never get back: the interest, the service charge, the maintenance, the opportunity cost of your deposit, and the transaction costs spread over your hold. The honest comparison is unrecoverable cost against unrecoverable cost.

What is the five percent rule?

A shorthand that the annual unrecoverable cost of owning tends to come to about five percent of the property value: roughly one percent maintenance, one percent property tax, and three percent cost of capital. If annual rent is below that figure, renting is cheaper on cash flow. In a market with no property tax the components shift but the method holds.

Why does the hold period matter so much?

Because the round trip cost of buying and selling is front loaded and does not care how long you stay. Spread over two years it is crushing. Spread over ten it is a rounding error. The break-even output tells you the point at which owning stops paying a penalty for the transaction.

Does price growth not settle the argument?

It changes it, and the calculator includes it, but growth is the one input you cannot know. Notice how much of the answer swings when you move that slider. Any case for buying that depends on a growth assumption you cannot defend is a bet, not a calculation.