There are a plethora of buy vs. rent calculators out there, but virtually all of them make at least some fixed assumptions. They might assume that you could invest the difference between renting and buying in the stock market at 8% return while you disagree, or they might assume that your property tax rate is 3% when it is only 0.5%.
The New York Times already had a pretty good one, but their new Buy vs. Rent calculator is the most interactive, user-friendly, fully customizable version that I have ever seen. Here are the factors that it lets you adjust:
- Home details (price, length of ownership)
- Mortgage details (rate, downpayment size, length)
- Future growth rates (Home price appreciation rate, rent appreciation rate, overall inflation rate, investment return rate)
- Taxes (Property tax rate, your marginal income tax rate)
- Transaction costs (closing costs on purchase, commission paid on selling)
- Costs of homeownership (maintenance, HOA fees, utilities covered by landlord, homeowner’s insurance)
- Costs of renting (security deposit, broker’s fee, renter’s insurance)
If I could find a flaw with the calculator, it would be that you now have the power to tweak your assumptions to reach your desired answer of renting or buying. “Well, if I adjust investment return a bit higher, and I reduce the commission to sell with a discount real estate agent, and stay in there a couple extra years… we should buy!”
Of course, an accompanying NYT article points out that buying a home isn’t all about the numbers.