Buying vs. renting: a real numbers breakdown

Executive overview

Most people assume selling a home at a gain means profit. When you account for all ownership costs — HOA fees, property tax, mortgage interest, repairs, and realtor commissions — the picture changes dramatically.

Noah Kagan sold a condo for $67,500 more than he paid, then discovered he actually spent $78,000 net to live there for three years. Renting an equivalent unit would have cost $82,800 — a difference of roughly $4,800.

The hidden costs of ownership routinely erase the apparent gains from appreciation.

The real numbers on a $360k condo (3 years)

• Purchase price: $360,000 (2014); sale price: $427,500 (2018)
• Apparent profit: $67,500
• Actual ownership costs: $145,000 (HOA $14k, property tax $24k, mortgage payments $80k, repairs, 6% realtor fee)
• Net cost to own: $78,000
• Equivalent rent: $2,300/month → $82,800 over three years
• Difference between owning and renting: ~$4,800

The opportunity cost of the down payment

• 20% down on $360k = $72,000 locked in the property
• S&P 500 returned ~8%/year over the same period
• That $72,000 invested would have generated ~$17,000 in profit
• Down payment opportunity cost is rarely factored into the buy-vs-rent decision

Pros and cons of ownership

Pros

• Full control — no landlord can evict you
• Freedom to renovate and personalise
• Psychological ownership and status

Cons

• Total cost of ownership is higher than most buyers expect
• All maintenance and repairs fall on you
• Larger assets take months to sell; you can't exit quickly
• High fixed mortgage increases financial pressure if income drops

Five key takeaways

1. Total cost of ownership — always include HOA, tax, interest, repairs, and selling costs, not just purchase vs. sale price
2. Don't assume real estate beats alternatives — run the numbers against index fund returns before committing capital
3. Large assets are illiquid — a TV sells in hours; a condo can sit on the market for months with a single offer
4. Lower monthly overhead = more freedom — a high mortgage forces income pressure; renting preserves flexibility
5. Investing vs. spending — buying a home you live in is often spending, not investing; treat it accordingly

Tools and resources

• NYT buy-vs-rent calculator: shows how long you need to stay before buying beats renting in your city
• Spreadsheet with the full cost breakdown: okdork.com/podcast/81