Methodology
How the Rent vs. Buy Calculator works
How Tallivo compares the multi-year net cost of renting versus buying, giving both paths the same starting capital for a fair comparison.
The formula
net cost = total cash paid out − asset value recovered at the horizon
Step by step
- Both paths start with the same cash: the buyer's down payment plus closing costs.
- Buying: each year adds mortgage principal & interest, property tax, insurance, HOA, and maintenance. The home appreciates and the loan amortizes; net equity if sold = home value − loan balance − selling costs.
- Renting: each year adds rent (growing annually). The renter invests the starting cash and earns the investment return; those gains offset rent.
- Buy net cost = cash out − net equity recovered. Rent net cost = rent paid − investment gains. The lower figure wins; the breakeven year is where buying's net cost drops at or below renting's.
Assumptions & limitations
- The renter invests only the upfront lump sum, not the month-to-month cash-flow difference — a transparent, standard simplification.
- Constant appreciation, rent growth, and investment-return rates; all are uncertain and none are guaranteed.
- Closing costs 3% of price and selling costs 6% of sale price by default; property tax and maintenance track the home's current value.
- Ignores income-tax effects (mortgage-interest and property-tax deductions, investment taxes).
Sources
Model reviewed 2025. Figures are planning estimates, not a loan offer — this is not financial advice.