The Price-to-Rent Ratio, Explained for Normal People
Learn the price-to-rent ratio formula, see a 2026 example, and test whether buying or renting looks stronger in the Rent vs. Buy Calculator.
Answer five quick questions to seed a baseline comparison.
Rent vs Buy Calculator
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The "rent is throwing money away" trope misses the opportunity cost of the down payment. If you buy, the down payment is locked up in a non-liquid asset earning the appreciation rate. If you rent, the same capital can sit in a 60/40 portfolio earning a different rate. The calculator runs both paths and tells you when buying overtakes renting in total wealth.
Realistically the answer depends on your hold period, your local rent vs price ratio, your interest rate, and the alternative investment return. We model all of them with sane defaults you can override.
What this calculator covers
Use these as a quick scope check before you rely on the output.
- •Total-wealth comparison over your hold period
- •Opportunity-cost modeling for the down payment
- •Rent inflation assumption
- •Closing-cost amortization
- •Break-even hold-period calculation
Frequently asked questions
What does break-even mean in a rent vs buy calculator?
It is the year when buying is projected to leave you ahead of renting, after ownership costs and the alternative of investing your cash. It is not a promise; it is a sensitivity point that changes when rates, rent, price growth, or time in the home change.
Which inputs change the answer the most?
Years in the home, mortgage rate, rent growth, home appreciation, maintenance, property taxes, closing costs, selling costs, down payment, and investment return usually matter most. Small changes to those assumptions can move the break-even year.
Why does investing the down payment matter?
Renting often leaves more cash outside the house. The calculator compares buying to renting and investing the down payment or monthly savings, so the result is about total wealth, not just the mortgage payment.
Is buying better if the mortgage payment is close to my rent?
Not automatically. Ownership also brings closing costs, taxes, insurance, maintenance, HOA dues, selling costs, and less flexibility. If you may move soon, those costs can outweigh similar monthly payments.
How long do I need to stay for buying to make sense?
There is no universal year count. Buying usually needs more time when closing costs, selling costs, maintenance, and mortgage interest are high. Renting can stay competitive when you invest the cash you would have put into the down payment.
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