Rent Versus Buy Calculator

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Adkins Capital Management LLC

Rent vs. Buy Financial Analyzer

Methodology By
Troy Morris Adkins
Input Parameters
🏠 Alex — The Buyer
$
3.5%20%40%
20%
2%7%12%
6.8%
1%3%6%
3%
2%6%10%
7%
0.3%1.5%3.5%
1.2%
0.5%1.5%3%
1.5%
0.2%0.75%1.5%
0.5%
0%3%10%
3%
10%24%37%
24%
📈 Troy — The Renter/Investor
$
0%3%8%
3%
$
1%7%15%
7%
Shared Parameters
$
Troy invests this full amount. Alex uses it for down payment + closing costs.
1yr10yr30yr
10 years
10yr20yr30yr
30 years
0%3%6%
2.5%
$
IRS standard deductions are adjusted annually for inflation — update this field each tax year. TCJA (2017): SALT deductions also capped at $10,000/yr. Tax savings only apply when total itemized deductions exceed this amount.
📈
Troy (Renter) wins by $175,037
Based on current inputs over the selected holding period, renting and investing the difference outperforms homeownership.
Alex — Buyer
Net Worth at Exit
$224,342
Monthly Cost: $3,360 → $3,819
Troy — Renter
Portfolio at Exit
$399,379
Monthly Cost: $2,225 → $2,896
Net Advantage
Difference
+$175,037
Troy leads
📊 10-Year Wealth Trajectory: Alex vs. Troy
Alex (Buyer) Net Worth
Troy (Renter) Portfolio
Breakeven Line
📋 Detailed Financial Comparison
Metric Alex (Buyer) Troy (Renter) Winner
🏠 Alex's Cost Breakdown
📈 Troy's Wealth Breakdown
🔬 Sensitivity Matrix — Troy's Advantage vs. Alex ($ Net Worth Difference)

Rows = Investment Return Rate | Columns = Home Appreciation Rate | ★ = Your current assumptions

Renter leads significantly (>$100K)
Renter leads moderately ($25K–$100K)
Renter slight advantage (0–$25K)
Buyer wins
The 5 Key Factors That Determine Who Wins — Alex or Troy
01
Time Horizon
How long you stay matters most
< 5 years → Renting wins Transaction costs overwhelm any appreciation benefit in the short term.

5–10 years → Neutral Outcome depends on market conditions and requires a detailed analysis.

10–15 years → Slight edge to buying Still requires a detailed analysis to confirm.

15+ years → Owning usually wins Equity accumulation and appreciation begin to decisively outpace rent savings.
02
Price-to-Rent Ratio
Home Price ÷ Annual Rent
< 15× → Buy Renting is expensive relative to home values — ownership costs are competitive.

15–25× → Analyze carefully Neither option has a clear advantage — local conditions and your situation determine the outcome.

> 25× → Rent Buying is expensive relative to renting. High-cost markets like San Francisco (31×) and NYC (22×) fall here.
03
Investment Discipline
What you do with your savings
Troy invests savings → Renter wins The entire financial case for renting depends on one condition: the monthly savings versus ownership costs must be captured and reinvested — every month, without exception.

Troy spends savings → Buyer wins by $200K+ If the renter spends rather than invests, homeownership wins decisively. Forced equity is a powerful wealth-building mechanism for those without investment discipline.
04
Market Assumptions
Appreciation vs. Investment Returns
The buy vs. rent decision is fundamentally a bet on whether home price growth will outpace diversified equity returns.

Historically, stocks have won Over most 10-year windows, S&P 500 returns have outpaced home appreciation — giving the disciplined renter the edge in 32 out of 36 modeled scenarios.

High appreciation flips the result At 6%+ annual home appreciation with investment returns at 7% or below, buying outperforms. Use the Sensitivity Matrix tab to model your specific assumptions.
05
Tax Benefits
Deductions for owners
Capital gains exclusion Up to $250K (single) or $500K (married) in home sale gains are excluded from federal tax — a powerful advantage for long-term owners in appreciating markets.

Mortgage interest deduction Available on loans up to $750K, but post-TCJA many Midwest homeowners no longer benefit from itemizing — the $29,200 married standard deduction often exceeds total itemized deductions.

SALT cap Property tax deductions are capped at $10,000/year under the 2017 Tax Cuts & Jobs Act.
Methodology Notes & Disclosure

① Tax Savings — TCJA vs. Pre-TCJA

The companion presentation (Slide 7) shows $55,764 in tax savings over 10 years. That figure was calculated using pre-TCJA full itemization — meaning mortgage interest plus property taxes multiplied by the marginal tax rate, with no standard deduction threshold applied.

This calculator applies correct post-TCJA (2017) law: the homeowner only receives a tax benefit on the amount by which their itemized deductions exceed the standard deduction for their filing status (user-adjustable above). SALT deductions are also capped at $10,000/year.

For a married Midwest homeowner at the base case assumptions, itemized deductions do not exceed the standard deduction in any year — producing $0 in incremental tax benefit. This is consistent with the presentation's own Slide 7 footnote, which acknowledges that many Midwest homeowners no longer benefit from itemizing post-TCJA. The calculator's result is the more accurate real-world figure.

② Monthly Savings — Variable vs. Fixed

The companion presentation (Slide 7) calculates Troy's investment portfolio using a simplified flat $1,000/month savings assumption — the average difference between Alex's ownership costs and Troy's rental costs over the 10-year period.

This calculator computes the actual monthly savings in each individual year. Because Alex's ownership costs grow over time (property taxes, maintenance, and insurance all rise with home appreciation), the monthly savings gap widens gradually from ~$1,175/month in Year 1 to ~$923/month in Year 10 as rent inflation catches up. Each month's savings is invested and compounded at the user-specified investment return rate.

This variable methodology is more precise and produces a Troy portfolio approximately $16,000–$17,000 higher than the presentation's fixed-savings simplification — making the renter's advantage modestly larger than shown in the presentation.

Peer Review Note: This calculator is the interactive companion tool to the presentation "The Economics of Homeownership: A Comparative Analysis of Renting vs. Buying" by Troy Morris Adkins, Adkins Capital Management LLC. To get the most from this calculator, we recommend watching or reading the full presentation first — it explains the methodology, the Alex vs. Troy scenario, and the key factors that drive the results.

The calculation engine was independently verified against the presentation's base case (Slides 6 & 7). All component-level figures match within rounding (home value, selling costs, mortgage balance, cash from sale, Troy's initial investment growth, and total cash outlays all reconcile to within $100 of presentation targets). The two variances described above are intentional methodological improvements over the presentation's simplified figures — not errors. Both differences cause this calculator to show an even larger renter advantage than the presentation, further supporting its core conclusion.

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