Rent vs Buy

Housing is a triangle: rent per month, the buy structure, and the net worth required to carry either choice. This page translates the messy house numbers into the language FIRE people already use.

The Triangle

Key number: Rent. Editing one triangle value checks its radio; the other two are solved from it.

Rent

I can rent for dollars per month, and rent grows percent per year.

Buy

Or I can buy with a mortgage buy in cash a home worth dollars.

The mortgage uses dollars down, a percent interest rate, and a year term.

The house appreciates percent per year. Property tax is percent of home value, maintenance is percent, insurance is dollars per month, and HOA is dollars per month.

Buying costs percent up front, selling costs percent at exit.

Portfolio

I want this housing choice to be equivalent to dollars invested in the stock market over the stay period. I assume invested portfolio money grows percent per year. The equivalence uses compounding only.

Translation

The rent side starts at $0 per month. The buy side burns $0 per month before equity, with $0 locked into the house at purchase.

Loading comparison.

Opportunity Cost

The normal question is whether I can afford the payment. The investment question is what the house removes from the portfolio engine. The buy cashflow is $0 per month, but the first-year drag is $0 per month after counting non-equity owner costs and positive growth drag.

The cash used to buy is $0 that no longer compounds in the stock portfolio. It could grow by $0 in the first year at the selected portfolio return. The house offsets that with $0 of expected first-year appreciation.

Net Worth Path

This chart compares standalone equivalents: the future value of the rent stream, the home's after-sale equity, and the invested portfolio.

Buy Numbers

Sensitivity

The fragile part of the buy number is the spread between portfolio returns and home appreciation. The table below keeps the other assumptions fixed and changes only those two rates.