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Should you Buy or Rent? Calculator + Inforgraphics

I am an immigrant to this country and let me tell you, the American Dream resonates with me.  For someone who came to this country with next to nothing, the possibility that I can, through just hard work, be able to own my own white picket fence house with the 2 cars, is mind blowing.  Of course, for the “Dream” to become reality, it has to be infused with sound numbers and judgement :).

When my husband initially moved to Southern CA, the “dream” was a two storied villa with large picture glass windows overlooking the Pacific.  Relaxing in our lounge chairs, drinking martinis, watching the sunset with the cool blue ocean kissing the angry red sun and where the nature’s play of colors beats Picasso, now that’s the life. Being young and naive, we looked up the price of the houses, in Malibu of course, to see how much we had to save. *Kaboom*, we got our first sticker shock, million dollar houses were on the cheap side. Ok, scratch that dream.

We rented for a couple of years. Around 2006, people were encouraging us to buy because the market was so good and real estate is such a great investment. We started looking for houses in the neighborhood we were renting, after all we could afford the rent, so the houses in this area should be affordable right ? Plus we weren’t that far from Malibu.  So we couldn’t see the sun kissing the ocean every evening but rolling hills, beautiful SoCal weather, that’s still pretty darn good. That’s when we got our second sticker shock. Everything was way more expensive than we anticipated (I mean like 2X more expensive!).

buy or rent 1

From ocean to mountain to parking lot view

So what were we doing wrong?  Up until that point we were looking for our house based on just emotions. We didn’t actually sit down and do a calculation on what we could afford, how much we needed to save or even whether we should buy at all.  Being analytical by nature, I started looking for calculators that would help me analyse the financial aspects of the decision.  We decided to give up our “house hunting” (“Dream” on hold, anyone?) and start saving as much as we could for the down payment without getting suckered into all the buying advice.

Fast forward 5 years.  We’ve been through a horrible housing crash (thank God we didn’t dive in back in ’06) and now that the housing prices are lower, we’ve been advised to buy again because, after all, the housing market has bottomed out.  We are a little older and wiser now. I don’t want to listen to people blindly and let my emotions run the show. I want to analyse:

  • How much we could afford and if it is really wise to buy a house right now in the area we currently live in.
  • Should we buy or continue to rent?

Buy or Rent Calculators

I have been to different open houses in our area and now have a realistic estimate of house prices. I tried different buy vs rent calculators to run the numbers for our situation. I was not happy with any of them.  Some of the deficiencies I found:

  • They were either incomplete or overly simplistic. There are a lot more factors to consider than just the rent and the house price, which is what a number of these calculators take into account.
  • No information on how the numbers are derived or no breakdown of data. I don’t want someone to make the decision for me, I want the information to aid me with my own decision.
  • No control of input other than simple rent/house price. There were a lot of assumptions and numbers behind the black box which I can’t play with.

So I decided to put together my own calculator in Excel.

Download the Excel buy or rent calculator.

As a geek who likes numbers and analysis, I have provided ALL the numbers with a month-by- month breakdown of the cash flow analysis of the buy vs rent equation. Oh yes, I have made assumptions, but I have the assumptions stated and you can easily change all of them. Instead of writing a boring tutorial on how to use this spreadsheet I have made a video tutorial with an example scenario. [For people who don't like videos, here is a PDF cheat sheet for the Excel calculator]

How to use the buy or rent calculator

Where you should buy and where you should rent

Just for fun I decided to try a few major cities in the United States to see how they compare (rent and the house prices are from Trulia.com, Zillow, census.gov).

Assumptions : Average rent for a 2 bed/2 bath town home, stay in the house for 8 years, 20% down payment

San Diego

  • Rent : $1,670
  • House Price: $396,409
  • Total savings if renting : $200,929
  • Net walkaway cash if buying : $193,679
San Antonio

  • Rent : $884
  • House Price : $89,068
  • Total savings if renting : $685
  • Net walkaway cash if buying : $43,517

  • Rent : $2,019
  • House Price : $189,566
  • Total savings if renting : -$52,193
  • Net walkaway cash if buying : $92,618
New York

  • Rent : $3,538
  • House Price : $1,383,612
  • Total savings if renting : $938,259
  • Net walkaway cash if buying : $676,012

The buy or rent decision (based on finances) is driven by the cash flow. For someone disciplined enough to save the difference between the buy cash flow and the rent cash flow, renting is a much better deal in places with very high house prices. All the myths about renters not building equity, renting being the same as throwing money down the drain, etc. are all WRONG.

Buy or Rent : Other considerations

As much as I like numbers, I know buying is not only about numbers. There are several intangible factors that go into the buy or rent decision.

  • Distance to work : A lot of us don’t consider this seriously. We see the distance and figure it is not too far away from work. When factoring in the time wasted during peak hour commutes, this could cause some serious time/money damage.
  • Mobility : People say buying a house offers stability. I disagree. Buying a house does limit the job potential to just that area. Most people don’t want to sell the house and move. Having strong ties to home prevents people from leaving. According to the SBA, in general, if you are older, married with children and a homeowner, you are less likely to leave your home state. Home ownership decreases the likelihood of mobility by over 12 percent for wage and salary workers and between 22 and 24 percent for the self-employed.
  • Doing your own maintenance : For some people house maintenance could be a huge deterrent to buying their own house. While renting, if a pipe breaks, all you have to do is pick up the phone and call the landlord.


To buy or rent is a personal decision based on the money we can afford and other personal priorities. I want to finish this post with 2 things

  1. At the end of the day, every one of us is different. We might have different incomes, expenses, needs, priorities and dreams. We have to do the analysis based on our OWN situation with our OWN numbers before making a decision. Do not blindly go by people who say it is good to rent or good to buy. Do as much as possible to “know” whether it is good to rent or good to buy.
  2. Sometimes it might not be financially prudent to buy when the situation favors renting (or vice versa). But we might still want to buy if it is affordable, for non-tangible reasons. That is not wrong, as long as you “know” the numbers and make an informed decision.

Now, this is my first calculator and I could use some help. I have a few things coming up in the second version of the calculator (Ex : Capital gains for the renter’s savings) but I would like you to try it out and let me know if you see any problems. To make it more worthwhile, I am going to pay you. I will give away a $25 Amazon gift card to the person who provides the best suggestions to improve. Bring it on!

Sources used for infographics and other statistics mentioned in this post -

Photo credits : imjosh, the_tahoe_guy, aidanmorgan

{ 12 comments… read them below or add one }


I love this post. It is so information rich on a topic that I hold dear. For me, being in central Indiana, the answer is clear: Buying is the way to go. However, it only makes sense that on the coasts and in big cities, renting is the cheaper alternative. Maybe someday the numbers will make more sense for those locales but until the market adjusts, just keep renting.


20's Finances

This is a fantastic post. I am definitely going to download the excel spreadsheet when I get home. Although, being in the greater NYC area, I already know that buying is probably not the best way to go. Thanks for all the work you put into this. Maybe it was how I was raised, but I still like the idea of having a lower housing payment (no mortgage) in retirement.


Jeffrey Trull

Thank you, Suba, for coming out with a post that doesn’t just tell people to buy a house! I’m a renter, primarily for mobility reasons, but I realize that there are many perfectly sensible financial reasons to be a renter, too! Sadly, a lot of people don’t, and perhaps some of those people could’ve been better insulated by the housing market burst and the recession had they made a decision NOT to buy.

I like how the spreadsheet defaults are realistic in terms of appreciate (3%) and depreciation (1%). Historically, you can expect 1% appreciate after inflation, and you’re lucky to even get that in this housing market!

I just got into the calculator, and I think this is awesome! My only problem: I don’t know how to fill in the boxes for homeowners. For example, I know absolutely nothing about yearly homeowner’s insurance nor do I have a guess at yearly maintenance. Are there suggested values for this, or some easy resource for estimating?


Freddie @ FreddieTaylor.com

Wow, hell of a post! I love the infographic for sure. That is awesome. I have always wanted to do something like this on my investment site, but never went for it. Hopefully, this will push me over the edge.


The Wealthy Canadian

Wow, great job on providing such a detailed analysis.

I think you’re absolutely right in that everyone has to properly assess their own individual set of circumstances before plunging in and buying home. I think renting can make a lot of sense in many cases.; I am certain that many people have become high net worth individuals by renting their entire lives.

From a personal standpoint, I’ve been able to justify home ownership based on the conditions and location to which I live. I like the prospects of long-term appreciation of the asset, as well as having the equity of the home as a possible investment option.

Again, great job on the post!

All the best,



Thanks for putting this post, spreadsheet and video together, great work. I live in NYC, so I am pretty sure that renting is always going to a better deal. Home prices, maintenance fees and taxes are so high here. I like the idea of playing a flat rental rate anyway. I plan to hold on to your spreadsheet until it becomes time to look for my house in the ‘burbs.



Great post, Suba! Love the infographic!!


Well Heeled Blog

Wow, thanks for the great calculator! I’m definitely using it when it comes to my renting vs. buying decision. I do think there is A LOT to be said for having a fully paid-off home when you are near or in retirement. Imagine having the biggest fixed expense off your plate, especially if you are an older worker who just got laid off. I think Funny About Money had a post about that – she was unemployed/underemployed for a significant period, but because she had a paid-off home she never worried about being out on the streets.



Suba, this is good; playing with it now. I think you can definitely make it better than the New York Times version (http://www.nytimes.com/interactive/business/buy-rent-calculator.html) with a few tweaks.

First, I’m thinking you could add something with utilities. Assume 0% get paid in the renter scenario, but I know a lot of apartments near me do gas, garbage & water. When I was in a condo, the HOA did water and garbage, for example, and that was in a purchase.

Second, you can make the tax section more detailed – include the capital gain exclusion like the NYT calculator, and maybe add a field asking how many other deductions a buyer estimates (since you have to itemize to deduct mortgage interest). Of course, leave the assumption as ‘more than the standard deduction’.

Third, you might want to have another sheet which zeroes out all the assumptions for this, but you could include some estimate of affordability. Either front end or back end DTI (I use 28% PTI on my site, which might be codified as an SEC rule) and an entry for income. I don’t know you can make it affect the numbers, but it’s a bad idea to take out a mortgage with a 55% back end DTI, for example (and good luck finding a bank…).

Last thing, factoring in mortgage points would blow the other calculators out of the water.

I’m a sucker for calculators. Great work!



Loved your spreadsheet! Your “calculator” provides potential buyers the basis to make informed decisions. Most online calculators does just the opposite. I’m a sucker for amortization table, cash flow, and charts. Can’t wait to see your second calculator.



Awesome Excel worksheet. Seems so simple but I’ve struggled for years to figure out a practical way to make the rent vs. buy point to people who seek advice from me (People generally tend to think all accountants are good with these things…) anyway..amazing work…thanks for posting this.


Jason Cabler (@DrCabler)

Wow, what a good in depth analysis! I think it’s always better to buy over the long term, but people have to realize that even in good economic conditions, a house may not be a good investment. We’ve been conditioned over the years to look at a house as being an investment, when in reality many times it’s not. After taxes, maintenance, mortgage interest, and insurance you do well just to break even over 30 years. So is renting better? Some people think so. However I ran some numbers on that in a recent article I wrote that spells it out. It’s not nearly as exhaustive as this great article but I think some people may be surprised. http://www.cfinancialfreedom.com/CFFwordpress/?p=1743


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