Yet Another Rent vs Buy Calculator
Or for short, YARBC. Smooth off the tongue!
Too long; didn't read ...
- Don't buy a home unless you intend hold the property for at least 5 years.
- Buying a home is not always the best financial decision. In certain cases renting and investing the difference yields better results.
- It's best not to think of purchasing your primary residence as an investment. Remember housing doesn't earn you money. Prioritize what incurs lower costs given your situation, requirements, and timeline.
- This calculator is meant for traditional homebuyers, not house hackers, live-in flippers, or other income-generating strategies.
I present to you ... YARBC
How to use the calculator:
- All cells highlighted blue are editable
- Start by comparing the cost of a home you intend to buy vs. renting a comparable home. This gives the clearest view of buy versus rent.
- You can also compare the cost of a rental you can see your family living in for ~3yrs, versus the cost of a home that fits your family's current/future lifestyle for 7+ years. This highlights the greater opportunity cost involved with going for your ideal long term home.
Additional tips:
- Take note of your annual losses as a homeowner (interest, taxes, insurance, HOA fees) versus as a renter.
- Keep in mind that there is an opportunity cost to homeownership. The extra costs you pay each month as a homeowner, and your downpayment, is cash that can't be invested elsewhere (such as the stock market).
- The most comfortable housing budget is 33% of your take-home income, after accounting for other debts. You can spend more, but be aware of the trade-offs when you do. For reference: 25% of take-home is safest, 33% of take-home is safer.
Roast me!
All feedback is welcome! This calculator doesn't and can't account for all financial variables of homeownership. However if you feel there is something important that is unaccounted for, shoot me a message! I'd love to make this a better resource for myself and others.
Recommended Resources
- Book - First Time Home Buyer (Scott Trench, Mindy Jensen)
- Youtube - The Housing Market is Bankrupting Americans (Ramit Sethi)
- Youtube - Renting vs. Buying a Home (Ben Felix)
- Youtube - Mistakes First-Time Home Buyers Make (Javier Vidana)
- Calculator - Is It Better to Rent or Buy? (NYT)
- Calculator - Rent vs Buy (PWL Capital)