Rent vs Buy & Property Investment Calculator

Comprehensive Rent vs Buy & Property Investment Guide

Deciding whether to rent or purchase real estate—or evaluating a residential rental property as an investment—requires assessing long-term capital flows, opportunity costs, rental yields, and net return on investment (ROI).

1. Rent vs Buy Financial Framework

Comparing renting versus buying requires comparing total unrecoverable costs over a fixed time horizon:

• Renting Costs: Total monthly rent paid + annual rent inflation + lost investment gains on down payment capital.
• Buying Costs: Down payment + cumulative mortgage interest + property taxes + maintenance/HOA - accumulated equity growth.

2. Rental Yield Metrics for Investors

Property investors evaluate income performance using two core yield metrics:

3. Property ROI & Cash Flow Projections

Total return on investment combines monthly net cash flow (rental revenue minus mortgage payment & expenses) and property appreciation upon final sale.

Worked Examples by Mode

• Rent vs Buy Example: $2,000 monthly rent with 3% rent inflation vs $400,000 home purchase over 7 years. Net cost of renting is $184,812 vs Net cost of buying $118,500. Buying saves $66,312 over 7 years.
• Rental Yield Example: $350,000 property generating $2,200 monthly rent with $3,600 annual expenses yields 7.54% Gross Yield and 6.14% Net Yield (NOI $21,480/yr).
• Property ROI Example: $300,000 purchase price, $60,000 down payment, $2,500 rent, $1,700 expenses over 5 years @ 4% annual appreciation yields $48,000 cash flow + $64,996 capital gain = $112,996 total profit (188.3% Total ROI, 23.6% Annualized Return).