In this illustrative example, renting ends ahead at 3, 7, and 10 years—by about $49,727, $54,304, and $54,479 in ending net worth. Buying catches up around year 23 here. That crossover is for these inputs, not a national rule. Stay length matters, but it is not the whole game.
The example
Both paths start with the same cash: a $80,000 down payment plus $12,000 in buyer closing costs—$92,000 total. On the buy side that cash goes into the house and closing. On the rent side it stays invested. Monthly housing costs start higher for the buyer.
| Home price | $400,000 |
|---|---|
| Down payment (20%) | $80,000 |
| Buyer closing costs (3%) | $12,000 |
| Starting cash (both paths) | $92,000 |
| Mortgage | 6.5% APR · 30 years |
| P&I | $2,022.62 / mo |
| Property tax | $366.67 / mo |
| Insurance | $133.33 / mo |
| Maintenance | $333.33 / mo |
| Buy housing (month 0) | $2,855.95 / mo |
| Starting rent | $2,000 / mo (~$855.95 gap) |
| Home / rent growth | +3% / year each |
| Invested-cash return | 7% / year (base case) |
| Selling costs | 8% of sale price when buyer exits |
Assumptions (disclosed): property tax 1.1% of purchase price per year; homeowners insurance $1,600/year; maintenance 1% of purchase price per year (flat monthly); no PMI at 20% down. Ending net worth matches the MyClearCost rent vs buy calculator (ending-net-worth mode). This is a planning illustration, not a Loan Estimate or market forecast.
3, 7, and 10 years
Here is ending net worth if the buyer sells after each horizon and the renter keeps investing the same starting cash plus the monthly housing gap.
3 years
Rent ahead $49,727
- Buy NW
- $93,588
- Rent NW
- $143,315
7 years
Rent ahead $54,304
- Buy NW
- $163,262
- Rent NW
- $217,566
10 years
Rent ahead $54,479
- Buy NW
- $223,278
- Rent NW
- $277,756
Why renting starts ahead — and why buying can catch up
At the start, buy housing costs about $2,855.95 a month versus $2,000 rent—a gap of about $855.95. The renter can invest that monthly difference and the full $92,000 starting cash. The buyer’s cash is tied up in down payment and closing costs, and selling later deducts about 8% of the sale price in this model.
Buying still builds equity through principal paydown and home appreciation. Over a long enough stay, that equity (after selling costs) plus any surplus invested on the buy side can overtake the renter’s portfolio—as it does around year 23 in this example. Short stays pay the transaction costs without enough time for equity to catch up.
One assumption can change the answer
The invested-cash return is a judgment call. At year 7 with a 7% annual return assumption, renting is ahead by about $54,304. Set that return to 0% and the picture flips: buying ends ahead by about $18,046 (buy NW $163,262 vs rent NW $145,216).
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Methodology notes
Figures above match the site calculator’s ending-net-worth mode: monthly compounding on invested balances, monthly rent growth, year-end home appreciation, flat maintenance on purchase price, and selling costs applied when the buyer exits. Mortgage interest tax deductions, HOA dues, PMI (when down payment is under 20%), and moving costs are not in this illustrative run. Details: How we calculate.
Sources
- Consumer Financial Protection Bureau, Owning a Home — Figure out how much you want to spend (closing costs typically 2–5% of purchase price, excluding down payment; the 3% figure above is illustrative inside that range, not an average)
- Illustrative ending net worth matches the MyClearCost rent vs buy calculator (ending-net-worth mode). See also methodology. Inputs are planning assumptions; your quotes and local market control.