Question 1

Is renting throwing money away?

Accepted Answer

No. When you buy a home, mortgage interest, property tax, insurance, maintenance, and closing costs are all non-recoverable costs too. The real question is whether the equity you build by buying exceeds what you'd earn by investing the difference while renting.

Question 2

How long do I need to stay for buying to make sense?

Accepted Answer

Typically 5-7 years minimum. Closing costs (2-5% when buying) and agent fees (5-6% when selling) mean you start in a significant hole. In expensive markets like NYC or San Francisco, the breakeven period can be 10+ years.

Question 3

What is the price-to-rent ratio?

Accepted Answer

Divide the home price by the annual rent for a comparable property. A ratio under 15 generally favors buying, over 20 favors renting, and 15-20 is a gray area that depends on your specific financial situation.

Question 4

Does this calculator account for tax deductions?

Accepted Answer

Yes. It models your marginal tax bracket, compares standard vs itemized deductions, accounts for the $10,000 SALT cap, and calculates the capital gains exclusion ($250k single, $500k married) when you sell.

Question 5

What investment return rate should I use?

Accepted Answer

The default is 7%, which reflects the S&P 500's historical real (inflation-adjusted) average annual return. If you prefer a more conservative estimate, try 5-6%. The calculator lets you adjust this to match your own risk profile.

Question 6

How is opportunity cost calculated?

Accepted Answer

If you rent, the money you would have spent on a down payment and closing costs gets invested instead. Each month, if buying costs more than renting (after tax savings), the difference is also invested. The portfolio compounds monthly at your chosen return rate.

🧾 What's included in our tax calculations

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