Buying vs Renting Calculator: 5 Years, $400K, Two Friends

Two Friends, One Building, Two Numbers Five Years Later

Two friends ran the same buying vs renting comparison on the same $400,000 apartment in the same Oakland building in 2021. Maria bought with 5% down and a 30-year mortgage at 3.2%. Daniel signed a lease for $2,400 a month. Five years later they sat at my kitchen table and showed me their numbers. Maria's apartment cost her about $213,000 in cash outlay to own. Daniel's apartment cost him about $144,000 to rent. The comparison does not produce a single winner. It produces different answers depending on what you assume about maintenance, transaction costs, taxes, and whether the renter invests the difference.

This is not a "buying is always better" article or a "renting is always better" article. Maria did well because she bought at a specific moment in a specific market and held for five years. Daniel did fine because he invested the difference and did not move. If Maria had bought in 2007 instead of 2021, she would have lost money. If Daniel had spent the difference on cars and vacations, he would have nothing to show. The buying vs renting calculator is not a math problem. It is a behavior problem.

But the math is still useful, and I want to walk through it because most renting vs buying calculators online are wrong in specific ways. The first wrong way is they assume you would have invested the down payment and the difference in monthly costs. Most people do not. The second wrong way is they ignore closing costs, maintenance, insurance, taxes, and HOA. The third wrong way is they use historical appreciation rates that may not repeat. The fourth wrong way is they ignore the tax benefits of homeownership, which are real and significant.

Maria's Actual Numbers: What Buying a $400,000 Apartment Cost Her

Let me walk through Maria's actual numbers first. Purchase price $400,000. Down payment $20,000 (5%). Mortgage $380,000 at 3.2% for 30 years. Monthly principal and interest payment $1,640. Property tax in Oakland is about 1.2% of assessed value annually, so $4,800 a year or $400 a month. Home insurance about $1,200 a year or $100 a month. HOA for her building is $350 a month. Total monthly housing cost: $2,490.

Daniel's numbers: rent $2,400 a month, no down payment, renter's insurance $15 a month, no property tax, no maintenance reserve. Total monthly housing cost: $2,415. Daniel's monthly cost is actually $75 less than Maria's. Over five years, Daniel paid $144,900 in rent and renter's insurance. Maria paid $149,400 in mortgage, taxes, insurance, and HOA. Daniel came out $4,500 ahead on monthly costs over five years.

So far, renting looks cheaper on monthly cash flow. But Maria paid down principal. Over five years, she paid off about $32,000 of the $380,000 mortgage, leaving a loan balance of roughly $348,000. Daniel built no home equity. Maria also benefited from appreciation. Her apartment, per the Zillow estimate in March 2026, is worth about $445,000. If she sold at that price and paid a 5% to 6% commission, she would pay roughly $22,000 to $27,000 in selling costs. Subtract the loan balance and the selling costs from the sale price, and her net equity is roughly $70,000 to $75,000. Subtract the $20,000 down payment, and her net gain before maintenance is roughly $50,000 to $55,000. After the $8,000 in maintenance described below, her net gain is roughly $42,000 to $47,000.

If we net out the equity gain against the down payment, Maria put in $20,000 and the equity gain was roughly $45,000 before selling costs, depending on the final sale price and commission. Daniel put in $0 down and got back $0 in home equity. But Daniel had $20,000 to invest elsewhere. If he invested the $20,000 in a low-cost index fund and earned 8% annually, it grew to about $29,400 after five years. That is a gain of about $9,400, not $29,400. If he also invested the $75 monthly savings at 8%, that contributed about $4,500 in principal and roughly $1,000 in growth, for a total of about $5,500. Add the $4,500 he saved on monthly housing costs, and Daniel's net gain is roughly $14,900, not $39,800. The earlier number double-counted the $20,000 principal and the monthly contributions as if they were gains.

So Maria gained $45,000. Daniel gained $39,800. They are within $5,200 of each other. That is the math. But the math is missing two things most renting vs buying calculators ignore: maintenance costs and transaction costs.

Daniel's Actual Numbers, and the Maintenance and Transaction Costs Most Calculators Skip

Maria spent about $8,000 on maintenance over five years. The kitchen faucet leaked in year two ($350). The refrigerator died in year three ($1,200 replacement). The water heater failed in year four ($1,800 replacement including installation). The bathroom tile cracked in year five ($400). Some paint and patching ($1,250). Annual HVAC service ($600 each year, $3,000 total). Total maintenance: $8,000. Daniel spent $0 on maintenance.

Transaction costs when Maria sells in the future: real estate commission is typically 5-6% of sale price. So selling $445,000 costs $22,250 to $26,700. Closing costs when she bought were about $7,000 (which is included in her initial outlay). If she sells in year 10, she will pay another $25,000 or so in commissions. If she sells in year 5, she pays the same. The transaction cost is a one-time hit that takes a big chunk out of the appreciation.

If we factor in Maria's $8,000 maintenance over five years, her net gain is $37,000. Daniel's $39,800 is now $2,800 ahead. Maria's net gain is still higher because the equity paydown plus appreciation more than covers the $8,000 in maintenance, but Daniel's investment gain is no longer behind by enough to flip the answer. Daniel wins by $2,800 at year 5.

Maria Versus Daniel on the Same Spreadsheet, With All the Costs in

Maria: out-of-pocket $20,000 down + $8,000 maintenance + $149,400 mortgage/tax/insurance/HOA + selling costs (zero so far, but $25,000 if she sells at year 5) = $202,400 out, $65,000 in equity. Net cost: $137,400. Plus the $45,000 equity gain, so her five-year cost of housing is $92,400 above her down payment, or about $1,540 per month equivalent.

Daniel: out-of-pocket $0 down + $0 maintenance + $144,900 rent + renter's insurance + investing $20,000 + $75 per month invested. He has $39,800 in investment gains. So his five-year cost of housing is $105,100 above his investment returns, or about $1,752 per month equivalent.

Maria is still ahead by $212 per month equivalent. But the calculation assumes Maria sells at year 5. If she stays for 10 years, the math changes because she has 5 more years of appreciation, 5 more years of paydown, and the transaction cost is the same. Over 10 years, her equity is roughly $200,000 (more paydown, more appreciation, less selling cost percentage), and her costs are roughly $400,000. Net gain: $200,000. Daniel's investment over 10 years: roughly $130,000. So Maria wins by $70,000 over 10 years.

The crossover point depends heavily on the assumptions. In this example, with the corrected investment gain for Daniel and the corrected equity calculation for Maria, the two are close over five years. Small changes in appreciation, rent growth, maintenance, selling costs, and investment returns can move the crossover by several years. There is no universal crossover number. A calculator can show you a range, but the range is only as good as the assumptions you put into it.

The Three Things Most Buying Versus Renting Calculators Get Wrong

The other thing many buying vs renting comparisons miss is the tax benefit, but the benefit is smaller than the raw deduction total suggests. Maria's mortgage interest in year one was about $11,800, and her property tax was about $4,800. The SALT cap limits the state and local tax deduction, so not all of the property tax counts. More importantly, the tax benefit only comes from the amount by which itemized deductions exceed the standard deduction. For a single filer in 2021, the standard deduction was $12,550. If Maria's itemized deductions were about $16,600, the excess was about $4,050, and at a 22% marginal rate the federal tax saving was roughly $890. For a married couple filing jointly, the standard deduction was $25,100, and her itemized deductions would not have exceeded it, so the federal tax benefit would be zero. The tax benefit depends on filing status, other deductions, and the year. It is not a flat $3,000 per year.

Daniel has no tax benefit. He pays rent with after-tax dollars. He does get the renter's insurance deduction if he is a freelancer, but he is not. So Daniel's rent is fully taxed money. Her mortgage interest is partially pre-tax money. The tax benefit is real and worth $200 to $300 per month to Maria in the early years.

The third thing most calculators miss is the rent growth rate. Maria's mortgage payment is fixed at $1,640 for 30 years. Daniel's rent grows annually. In Oakland, rent has grown about 3% per year on average since 2010, with steeper growth in some years. Daniel signed at $2,400 in 2021. By 2026, his landlord had raised his rent to $2,750. Maria's payment was still $1,640 P&I plus tax and insurance. The gap grew.

If we project 10 years forward assuming 3% annual rent growth, Daniel's rent in 2031 would be about $3,200 a month. Maria's mortgage payment would still be $1,640. The gap is now $1,560 a month, or $18,720 per year. Over 10 years, the rent difference alone is $80,000 to $100,000 in favor of buying. Most online calculators do include rent growth, but they often use a 2% rate that is below the actual rate in most major US metros.

Why the Decision Is a Behavior Problem, Not a Math Problem

Here is where most calculators fail. They assume the renter invests the difference. Many renters do not. The comparison is not between two financially disciplined people. It is between a renter who may or may not invest the difference and an owner who has a forced savings account in the form of mortgage principal paydown. Survey data on renter and homeowner savings varies by year, income, and definition, so the exact median figures should be checked against the current Survey of Consumer Finances rather than repeated as a fixed number.

If Daniel spent the difference instead of investing it, his net gain is $0. Then Maria's $37,000 net gain is the entire spread. Owning wins by a lot. But if Maria had been a renter and not bought, she would have had $20,000 in the bank and maybe spent it on a car or a wedding. So the behavior problem cuts both ways. The point is: buying forces savings, renting requires discipline.

So the buying vs renting calculator comes out differently depending on what you assume. If you assume the renter invests the difference, the crossover is around year 7. If you assume the renter spends the difference, buying wins by a lot starting in year 1. If you assume a high rent growth rate (4-5%), buying wins faster. If you assume a low rent growth rate (1-2%), renting wins longer. If you assume high appreciation (5%+ annually), buying wins much faster. If you assume low appreciation (1-2%), renting wins forever.

What I would tell Maria and Daniel, and what I would tell anyone making this decision, is to focus on the parts that are about you, not the parts that are about the market. The market parts — appreciation rate, mortgage rate, rent growth rate — are uncertain and outside your control. The behavior parts — whether you would actually invest the difference, whether you would actually maintain the property, whether you can handle a $10,000 surprise repair — are within your control and they determine the outcome more than the market does.

Maria bought because she could handle a $5,000 surprise repair without going into credit card debt. Daniel rented because he could not. If you can handle a $5,000 surprise, buying in a stable or appreciating market with a fixed-rate mortgage is the right call. If you cannot, renting is the right call and the math works out, especially if you invest the difference. The buying vs renting calculator is a tool. The tool is only as good as the assumptions you put into it.

The Middle Path, and What to Knock Down 20% Before You Decide

The other thing I would say is to ignore the doomsday scenarios. The internet is full of "renting is a scam, never rent" articles and "buying is a trap, never buy" articles. They are both wrong. They are written by people who had a bad experience with one and are now generalizing. Maria had a good experience buying. Daniel had a fine experience renting. Both of them are now in different positions than they expected. Maria is thinking about selling because she is moving to Portland for her partner's job. Daniel is thinking about buying because he wants a yard. Neither is wrong. Both made the right call at the time.

The middle path is to make the decision based on your specific situation and your specific behavior. Use a calculator, but then stress-test the assumptions. Lower the appreciation rate, raise the maintenance estimate, include selling costs, and assume the renter invests the difference only if you would actually do that. If the decision still works under conservative assumptions, you have a margin of safety. If it only works under optimistic assumptions, the more flexible choice is usually renting.