rent vs buy
should you buy or rent a home?
We just renewed our lease through August 2026. By the time it ends we will have been in our rental for 6 years. We’d extend if they let us. I have family renting next door and we took down a section of the fence between our houses so it’s like a single compound with 4 cousins and grandma all in the mix.
It’s one of those situations that we never take for granted. We’ll look back at these years with a nostalgia I can’t fathom.
However, my in-laws would rather own than rent. I’m always trying to make them feel better about the money they’re saving.
[Just to scale the numbers, we live in the equivalent of a $1mm house and pay $2,300 in rent. Property taxes here are 1.25%, insurance is .50%, and home maintenance costs are choose your own adventure but in a place that starts at $650 sq/ft to build, you can fill in the blanks.]
So I send them these so they can do their own computations:
- Nick Maggiulli’s Rent vs Buy Calculator
- NY Times Calculator. This one has been around for a long time and has a few more bells and whistles although Nick’s is good enough.
However, buy vs rent is far from a pure financial decision. There are other weighty considerations.
Which brings me to Khe’s new calculator which, in addition to the numbers, asks a few survey questions which get fed into a black box and spit out a score from 0-100 on whether you should buy or rent.
It only takes a few moments to do it:
Rent or Buy? Make the Right Decision
Tagline: Most home ownership calculators make a big mistake - they don't account for all your preferences. We fixed this for you.
I did it with a bunch of people and for the most part the answer it gives was pretty decently calibrated to what they expected.
I scored a 29, which is a bit high, I expected more like a 20. But I think having a semi-strong desire to customize my home pulled it up against what I think were values that point towards renting.
Khe will calibrate the weights in the calculator over time as he gets more feedback. A good question to add: “How liquid is the supply of rental homes in your area?”
The main reason we’d bite the bullet and buy is because the rental market isn’t liquid. In a city this wouldn’t be a concern.
[I remember many years ago a long-time SF trader telling me that “every landlord in the Bay Area is secretly a seller” and while that’s not 100% true it’s easy to understand if you can add and own a brokerage account. He was renting one of those amazing Pac Heights mansions for a number that probably couldn't cover the taxes if they weren’t Prop 13 protected. “Rent-control for rich people” is the kind of self-own SF prides itself on.]
My in-laws scored in the 70s on the quiz. Our family arrangement is on borrowed time. Maybe I like them more than they like me?
That’s ok, I love you guys, please stay!
[If they do decide to buy, I intend to engineer my next neighbor. I’ll put out a call for applications. Must be ok with us sauntering over with a boardgame and opinions.]