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Rent vs. Buy Calculator: Investment & Opportunity Cost Analyzer

Advanced financial modeling tool comparing homeownership equity against renting and investing the difference. Features breakeven analysis, opportunity cost projections, and PDF reports.

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Category Mortgage & Loans
Purchase Scenario
Property Expenses (Yearly)
Rent & Market Assumptions
Investment & Economy
After 30 Years...
Buying is Better
by $140,000 in Net Worth
Breakeven Year: Year 5
● Buying Net Worth ● Renting Net Worth
Year Buy Net Worth Rent Net Worth Equity Investments Total Benefit
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About

The decision to rent or buy is not merely a comparison of monthly payments. It is a complex interplay of Opportunity Cost, Equity Accumulation, and Unrecoverable Costs (interest, taxes, maintenance). This tool models two parallel financial universes over a 30-year horizon.

In the first universe, you purchase a home, building equity while paying interest and maintenance. In the second, you rent a comparable property and invest the initial capital (down payment) and any monthly savings into a diversified portfolio. Accuracy depends on inputs; small changes in the Investment Return Rate or Home Appreciation can shift the verdict by hundreds of dollars.

We utilize the Net Present Value approach where applicable, but primarily focus on Future Net Worth to determine the financial winner. Use this calculator to identify your Breakeven Year - the point where the transaction costs of buying are finally eclipsed by asset growth.

real estate investment mortgage analysis opportunity cost financial planning home equity

Formulas

The core comparison relies on calculating the Future Net Worth (NW) for both scenarios at month n.

1. Buying Net Worth:
The value of the home minus the remaining loan balance and selling costs.

NWbuy = HomeValuen − LoanBaln − (HomeValuen × SellCost%)

2. Renting Net Worth (Opportunity Cost):
The future value of the Down Payment plus the cumulative value of invested monthly savings.

NWrent = DownPayment × (1 + r)n + n∑i=1 (MonthlySavingsi × (1 + r)n-i)

Where r is the monthly investment rate of return. If NWbuy > NWrent, buying is the optimal financial decision.

Reference Data

YearRent Scenario Net WorthBuy Scenario Net WorthDifference (Winner)Home EquityRenter Portfolio
1$52,400$48,200Rent (+$4,200)$15,000$52,400
5$78,000$85,000Buy (+$7,000)$65,000$78,000
10$115,000$150,000Buy (+$35,000)$140,000$115,000

Frequently Asked Questions

Opportunity cost represents the potential profit you miss out on by choosing one alternative over another. When you buy a house, your down payment is "locked" in the property. If you had rented instead, that money could have been invested in the stock market. This calculator simulates that investment growth to provide a fair comparison.
Real estate is an illiquid asset with high transaction fees. Selling a home typically costs 6-10% of the sale price (agent commissions, transfer taxes, closing costs). Ignoring these costs often makes buying look artificially cheaper in the short term. We deduct 6% from the Buy Scenario's Net Worth to reflect true liquidation value.
Inflation affects both scenarios. For renters, rent prices typically rise annually (Rent Inflation). For buyers, maintenance costs and HOA fees rise with inflation, but the principal and interest portion of the mortgage remains fixed (hedging against inflation). Over time, this fixed payment is a major advantage for buyers.
The Breakeven Year is the point in time where the Net Worth of the Buyer exceeds the Net Worth of the Renter. Before this year, renting is mathematically cheaper due to the high upfront costs of buying. After this year, the accumulation of equity and home appreciation makes buying the winner.
Yes. A common mistake is comparing Mortgage vs. Rent. You must compare (Mortgage + Tax + Insurance + HOA + Maintenance) vs. Rent. Experts recommend budgeting 1% of the home's value annually for maintenance (roof, HVAC, painting). This calculator allows you to adjust that factor.