Is renting really throwing money away?

Probably not. If you invest what you'd spend on a down payment and homeowner costs, you might come out ahead. This calculator compares both paths for your specific situation in California.

Two paths for your money

Imagine you have $140K saved for a down payment on a $700K home.

Path A — Buy: Your $140K goes into the house. You pay a mortgage, property tax, insurance, and maintenance. The home's value grows over time.

Path B — Keep renting: You invest that $140K in the stock market instead. Each month, you also invest whatever you're saving by not paying those extra homeowner costs.

After 10 years, which path leaves you with more money? That's what this calculator figures out.

"The stock market" here means an index fund — a simple, low-cost investment that tracks the entire US stock market (think: the S&P 500). You don't pick stocks. You own a small piece of all of them. It has historically grown about 10% per year.

Why this matters in California

Enter your home price, monthly rent, and down payment below. The calculator does the rest — results update live as you type. Browsing Zillow? Import a listing automatically.

Scenario

Time horizon

years

Your Situation

$
%
$
$

Mortgage term

Filing status

Renting & investing appears better

by $171,018

After-tax estimated wealth difference over 10 years (including selling costs and CA state capital gains tax)

Buying this home is financially equivalent to paying

$3,623/mo in rent

Your rent ($2,800/mo) is $823/mo below this — renting wins

Buy: Net wealth (after tax & selling costs)

$454,847

Rent + Invest: Portfolio (after tax)

$625,865

Wealth over time

Before taxes on gains and selling costs

Break-even frontier: rent vs. home price

The curve shows the rent at which buying and renting produce equal wealth. Above the curve, buying wins. Below it, renting wins.

Buy winsRent + invest winsYou

Break-even home appreciation

5.3%

The annual appreciation rate at which buying and renting break even

Break-even stock return

5.0%

The annual stock return at which renting and buying break even

Top sensitivity drivers

Which assumptions matter most? Each shows the dollar impact of a 1 percentage-point change.

  1. 1.Maintenance reserve±$114,118
  2. 2.Property tax rate±$95,485
  3. 3.Home appreciation rate±$90,257

How the comparison works

Each month, whoever pays more — the buyer or the renter — invests the difference in a stock index fund. If owning costs $5,000/mo and renting costs $3,000/mo, the renter invests $2,000/mo. If rental income or other factors make owning cheaper than renting, the buyer invests the surplus instead. This ensures neither scenario gets an unfair advantage from leftover cash.

Year-by-year breakdown

Trace every number the calculator uses — verify the math yourself.

YearBuy scenarioRent scenario
HomeMortgageNon-Eq CostTax BenefitWealthRentInvestedWealth
1$725K$554K−$55K+$4K$170K−$34K$184K$200K
2$750K$548K−$109K+$8K$202K−$69K$206K$243K
3$776K$541K−$164K+$12K$235K−$105K$227K$288K
4$803K$534K−$218K+$15K$270K−$143K$247K$337K
5$831K$526K−$272K+$19K$305K−$182K$266K$389K
6$860K$518K−$327K+$23K$343K−$223K$285K$445K
7$891K$509K−$381K+$26K$382K−$265K$301K$506K
8$922K$499K−$435K+$29K$422K−$310K$317K$571K
9$954K$489K−$488K+$33K$465K−$356K$332K$641K
10$987K$478K−$542K+$36K$509K−$403K$345K$716K
After tax$454,847$625,865

Final tax settlement

How the headline after-tax wealth numbers are calculated from the pre-tax values in the last row above.

Buy scenario

Home value at sale$987,419
Selling costs−$54,308
Net home proceeds$454,847
Home gain$233,111
CG exclusion−$500,000
Taxable home gain$0
Home CG tax−$0
After-tax home equity$454,847
Total buy wealth$454,847

Rent + Invest scenario

Portfolio value$715,975
Cost basis$345,151
Stock gains$370,825
Stock CG tax−$90,110
Total rent wealth$625,865

Important caveats

  • Tax modeling is simplified — actual benefit depends on your full tax picture, AMT, other deductions, and state-specific rules.
  • State income tax may increase the SALT cap limitation, further reducing the value of itemized deductions.
  • Standard deduction amounts are based on 2024 values and not adjusted for inflation over the time horizon.
  • Past stock market performance is not indicative of future returns. Real returns vary year to year.
  • This model uses constant annual rates for appreciation, rent increases, and stock returns. Real-world values are volatile.
  • This is not financial, tax, or legal advice. Consult a qualified professional for your specific situation.
View Results

How your tax bracket changes the math

One of the biggest advantages of buying a home is the tax deduction. You can deduct your mortgage interest and property taxes from your taxable income. But there's a catch most people miss: this deduction only helps you if the total exceeds the standard deduction you'd get anyway.

Here's a concrete example using a $700K home (20% down, 6.8% mortgage rate):

Year 1 mortgage interest

~$38,000

Property tax (1.1% of $700K, capped at $10K for SALT)

$7,700

Total itemized deductions

~$45,700

Standard deduction (single filer, 2024)

$14,600

The part that actually saves you money

$45,700 − $14,600 = $31,100

Now here's where your tax bracket makes a huge difference. Each dollar of that $31,100 saves you your marginal tax rate in actual cash:

22% bracket

Single filer earning ~$47K–$100K

$6,842/year saved

$31,100 × 22%

35% bracket

Single filer earning ~$232K–$578K

$10,885/year saved

$31,100 × 35%

That's a $4,043 per year difference — just from being in a higher tax bracket. Over 10 years, the higher earner gets roughly $40,000+ more in tax savings from the exact same home. Those savings reduce the effective cost of owning, making buying significantly more competitive.

This is one reason why two people looking at the same house can get completely different answers on rent vs. buy. Select your income bracket in Advanced Assumptions above to see how it affects your result — the calculator sets your tax rate automatically.

Assumptions & disclaimers

This is not financial, tax, or legal advice. This calculator is a simplified educational tool. It uses constant annual rates, simplified tax estimates, and cannot capture your complete financial picture.

Tax estimates are approximate. The actual benefit of itemized deductions depends on your full tax return, including AMT, other deductions, state taxes, and credits.

The rent scenario assumes the entire down payment and closing costs are invested upfront, plus any monthly savings. In practice, deployment timing and behavioral factors may differ.

Home values, rent, and stock returns are modeled as smooth annual growth. Real-world values are volatile and unpredictable.

Frequently asked questions

Is this calculator accurate enough to make a decision?
This calculator provides a simplified estimate to help you think through the tradeoffs. It uses reasonable defaults but cannot capture your full financial picture. Use it as a starting point for your research, not as a definitive answer. Consult a financial advisor for personalized advice.
How are taxes modeled?
The calculator estimates the mortgage interest deduction and property tax deduction (subject to the $10K SALT cap). If your itemized deductions exceed the standard deduction, the excess reduces your taxable income at your marginal federal rate. Capital gains on the home sale use the $250K/$500K exclusion, and selling costs reduce the taxable gain. Both stock gains and home gains above the exclusion are taxed at your combined federal LTCG rate (default 15%) plus California state capital gains rate (default 9.3%). The state CG tax is one of the biggest factors most people miss.
What about property tax deductions?
Property taxes are included in your itemized deductions, but subject to the $10,000 SALT (State and Local Tax) cap. In California, this cap often limits the benefit since property taxes alone can approach $10K on higher-value homes.
Does this account for inflation?
All values are in nominal dollars. The default stock return (10%) and home appreciation (3.5%) are nominal rates. If you prefer to think in real (inflation-adjusted) terms, reduce both the stock return and home appreciation by your expected inflation rate (roughly 2-3%).
What stock return should I use?
The S&P 500 has returned roughly 10% per year nominally over the long term. However, future returns are not guaranteed. Use 7-8% for a more conservative estimate, or use the Conservative preset which uses 8%.
What if I can get a lower mortgage rate?
Adjust the mortgage rate in Advanced Assumptions. A lower rate significantly reduces monthly payments and the total cost of ownership, often tipping the balance toward buying. You can also use the Optimistic preset which assumes a 6% rate.
What about maintenance and repairs?
The calculator includes a maintenance reserve (default 1% of purchase price per year), which grows annually at the cost growth rate (default 2.5%). This covers routine maintenance, repairs, and eventual replacements (roof, HVAC, appliances). Insurance and HOA costs also grow at this rate. Newer homes may need a lower base rate (0.5-0.75%), while older homes may need more (1.5-2%).
Can I save or share my calculation?
Yes! Click the 'Share link' button to copy a URL with your current inputs. Your inputs are also automatically saved in your browser's local storage and will be restored when you return.
What if rent goes up faster than expected?
Increase the 'Annual rent increase' in Advanced Assumptions. Faster rent increases make buying relatively more attractive because the renter's cost of living rises faster. In rent-controlled areas, you may want to use a lower rate (2-3%).
What about selling costs when I eventually sell?
The calculator includes selling costs (default 5.5% of home value) covering agent commissions, transfer taxes, staging, and other closing costs. These are deducted from the buy scenario's final wealth and also reduce the taxable capital gain on the home sale. You can adjust this in Advanced Assumptions.
Why doesn't this include [specific tax scenario]?
While this calculator models federal LTCG, California state capital gains tax, mortgage interest deductions, and the SALT cap, it doesn't account for AMT, state income tax deductions against SALT, depreciation (if renting out), 1031 exchanges, or other complex scenarios. For tax-specific decisions, consult a CPA or tax advisor.