This is Part 2 of Why Homeownership Is Not For Everyone
A lot of real estate advocates say the break-even point for buying instead of renting is around 2 to 5 years. In many major cities, though, that just doesn’t seem to hold up.
I built an Excel calculator to see whether I actually stayed in my condo long enough to come out ahead. I entered the numbers as accurately as I could. The mortgage rate and loan term are not perfectly exact because I refinanced partway through ownership, but for this exercise the approximation is close enough. The monthly take-home pay is also only a rough estimate, since my partner’s income is not fixed.
Using those inputs, this is what the calculator came up with:
The model compares net worth under two scenarios: buying versus renting. It assumes that you invest any remaining income after paying for housing and essential expenses.
In my case, the break-even point comes at around year 8. Since I’ve owned the condo for about 11 years, I come out ahead by roughly $20,470 compared to renting.
So at least I didn’t lose money. Still, for only about $20K in additional gain, homeownership feels like a lot of hassle.
I’m currently in the middle of selling my place, and I realized that there are plenty of extra costs that don’t always show up neatly in calculators: getting the home market-ready, paying for updates or repairs, moving out, and renting somewhere else while waiting for the property to sell.
And of course, the market is not something you can control. You cannot assume a place will sell quickly. I’ve seen similar condos sit on the market for more than six months.
The community here is very well kept, but the property value still did not appreciate as much as I had expected.
Conclusion
Overall, this exercise reminded me that the “buy vs. rent” decision is a lot more nuanced than simple rules of thumb make it sound. Even when buying technically comes out ahead, the margin may be smaller than expected once you factor in time, effort, risk, and selling friction.
If you want to run the numbers for your own situation, you can get the calculator on my Payhip:
