Rent vs. buy: which makes sense for you?

Renting and owning aren’t just different price tags — they’re different shapes of cost. Rent is one predictable number. Owning bundles a mortgage payment with property tax, insurance, maintenance, and the risk of large, lumpy repairs.

The real cost of owning

Beyond principal and interest, budget roughly 1% of the home’s value per year for maintenance, plus property tax and insurance — together these often add 30–50% on top of the mortgage payment alone.

• Mortgage principal & interest
• Property tax and homeowners insurance
• Maintenance — budget ~1%/year of home value
• HOA dues, where they apply

The real cost of renting

Rent plus renter’s insurance is close to the whole picture — no property tax, no maintenance bills, no surprise roof replacement. The tradeoff is that none of it builds equity, and rent can rise at renewal in a way a fixed-rate mortgage payment won’t.

The break-even horizon

Buying carries real transaction costs — typically 2–5% to purchase and 6–10% to sell. Those costs mean you generally need to stay somewhere 5–7 years before owning pulls ahead of renting the same place, though this shortens a lot in fast-appreciating markets and lengthens in flat ones.

A quick rule of thumb

Divide the home’s purchase price by the annual rent for a comparable place. Below about 15, buying usually wins; above about 20, renting usually does; in between, it depends on how long you’ll stay and what else you’d do with the down payment.

If you’re weighing it as a landlord

The same math runs in reverse on a property you already own: compare what you’d net selling and investing the proceeds elsewhere against what the property yields as a rental (cap rate, cash-on-cash return, and appreciation). If the rental yield is well below what the equity could earn elsewhere, that’s worth a second look — not necessarily a reason to sell, but a number worth knowing.