Complete Housing Cost Calculator

A detailed breakdown of how to properly calculate the true cost difference between renting and buying a home, focusing on often-overlooked factors.

Core Components of the Calculation

• Opportunity Cost

  • Calculate at 7% return rate on down payment
  • Based on historical market returns
  • Often overlooked in traditional calculations

• Maintenance Costs

  • 2% of property value annually
  • Higher in expensive cities like New York
  • Lower in other markets

• HOA and Building Fees

  • Can range from $1,000 to $5,000 monthly in luxury buildings
  • Particularly high in cities like New York
  • Must be factored into monthly costs

• Transaction Costs

  • Realtor fees (approximately 4%)
  • Closing costs
  • Can amount to hundreds of thousands in expensive markets

• Additional Ownership Costs

  • Higher quality furniture requirements for owned homes
  • Renovation costs
  • Property taxes

Growth Rate Assumptions

• Home Appreciation

  • Use 3-3.5% historical average
  • Avoid recency bias from unusual market conditions
  • Track record of roughly matching inflation over 100 years

• Rental Growth

  • Calculate at 3% annually
  • Can actually decrease in some markets
  • More negotiable than mortgage payments

Real World Application

• High Cost of Living Cities

  • Often 2.2x more expensive to own than rent
  • Example: $5,000 rent vs. $11,000 monthly cost to own
  • Currently more expensive to buy than rent in most US cities

• Decision Framework

  • Run numbers for specific market conditions
  • Consider long-term plans (minimum 10-year horizon)
  • Factor in lifestyle preferences beyond pure financials