Home & property · 3 min
Rent-versus-buy is the most moralised arithmetic in personal finance — 'throwing money away' on one side, 'a money pit' on the other. This instrument replaces the folklore with a month-by-month simulation: the buyer amortises, carries and appreciates; the renter invests the down payment and every month's difference. At the horizon, two net-worth figures. The larger one wins.
Like for like — the place you'd actually live in instead.
Transfer taxes, legal, valuation — sunk on day one.
Agent and legal on the way out.
The ownership bill renters don't get: upkeep, tax, insurance, the roof fund.
What the renter's capital earns.
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Rent, and invest the difference.
−$84,889
the renter's lead in year-10 net worth, at these assumptions
| The buyer | The renter | |
|---|---|---|
| Monthly outflow, year one | — | — |
| Home equity at the horizon | — | — |
| Investment portfolio | — | — |
| Net worth at the horizon | — | — |
| If invested money earns | Buyer's net worth | Renter's net worth |
|---|---|---|
| — | — | — |
| — | — | — |
| — | — | — |
The renter's discipline is the model's boldest assumption: every month's difference actually invested, for a decade. Most renters spend it — in which case buying wins as forced saving, not as investment.
Transaction costs make short horizons brutal: buying costs plus selling costs is most of a decade's appreciation. Under five years of certainty, the simulation almost always says rent.
A home is leveraged, concentrated and lived-in — three things this clean comparison flattens. The number decides the money; whether you want a landlord in your life is a different desk.
Everything below is simulated monthly from your inputs. Appreciation, rent growth and return are assumptions you control — the scenario table stresses the market ±2 points regardless.
buyer: pays mortgage + carry; equity = value_t − balance_t
exit: value_n × (1 − sell_costs) − balance_n
renter: invests (down + closing) on day one,
then invests (buyer_outflow_t − rent_t) each month at r
winner: larger net worth at the horizon
The gauge reads the buyer's end wealth against the renter's, parity at 1.0. When the monthly difference turns negative — rent has grown past the mortgage payment — the renter draws down, which is exactly what happens in life. Both households live in the same quality of home throughout; only the money differs.
Limitations. No tax treatment — mortgage-interest relief, imputed-rent taxation and capital-gains exemptions vary enormously by country and can move the verdict; apply your regime to the ledger above. Refinancing, moving before the horizon, and leverage risk in a downturn are outside the clean case.