Rent vs. Buy Housing Analysis: When Renting Outperforms Owning a Home

The traditional wisdom that "renting is throwing money away" is mathematically incomplete. While buying a home builds equity over long horizons, homeownership carries massive unrecoverable costs that do not build asset value—including mortgage interest, property taxes, home insurance, maintenance, and transaction fees.

The 5% Rule of Unrecoverable Housing Costs

Financial experts use the 5% Rule to estimate the annual unrecoverable cost of owning a home (1.5% property tax + 1% maintenance + 2.5% cost of equity capital). If renting an equivalent property costs less than 5% of the target home's purchase price annually, renting is mathematically favored over buying.

Run full year-by-year simulations on our Rent vs. Buy Simulator.