Rent vs buy a $500k house
Over 30 years, buying a $500k home comes out about $270,186 ahead — comparing buying (20% down, $100,000) against renting at $2,500/month and investing the down payment plus any monthly savings. Both paths start with the same money; the difference is where it goes.
Net worth over time: rent vs buy
Both start at age 30 with enough for the $100,000 down payment. The renter invests it (and any monthly difference) at 7%; the buyer puts it into a $500k home appreciating 3%/yr with a 30-year mortgage. In today's dollars:
| Age | Rent & invest | Buy |
|---|---|---|
| 30 | $128,957 | $126,028 |
| 35 | $312,491 | $338,348 |
| 40 | $534,542 | $593,399 |
| 45 | $802,864 | $899,997 |
| 50 | $1,126,598 | $1,268,522 |
| 55 | $1,517,480 | $1,712,178 |
| 60 | $1,989,712 | $2,259,898 |
What actually drives the answer
Rent vs buy is rarely about "throwing money away on rent." It hinges on a handful of levers this projection captures:
- Price-to-rent ratio. Here a $500k home is compared to $2,500/month rent. Where rent is cheap relative to prices, renting-and-investing can win; where buying is cheap relative to rent, owning pulls ahead.
- How long you stay. Buying carries big upfront costs (down payment, closing) that take years to earn back. The crossover in this scenario is around age 31. Move sooner and renting often wins.
- The invested difference. Renting only wins if you actually invest the down payment and monthly savings — not spend them. This model assumes you do.
Assumptions: 20% down, 6.5% mortgage, 30-yr term, 3% home appreciation, 1.1% property tax, 7% investment return, 3% inflation, single filer, no-income-tax state. Your local prices, rent, and how long you'll stay change the answer — model yours in the calculator.
How long you stay usually settles it
Buying starts you in a hole. Closing costs run roughly 2–5% of the price going in, and selling later typically costs around 6% in agent commissions plus other fees. On a mid-priced house those percentages translate into a large sum that has to be earned back through equity and the monthly gap between owning and renting before buying pulls ahead.
That is the logic behind the familiar five-year rule: it commonly takes about half a decade for the advantages of owning to outrun the round-trip transaction costs. The exact figure depends on the market, but the shape holds — the break-even is measured in years, not months.
The practical implication is that time horizon, more than interest rates or home prices, tends to decide the question. If there is a real chance of relocating, changing jobs, or needing a different home within a few years, renting is usually the cheaper choice no matter how the rest of the numbers look. Certainty about staying put is what turns buying into the better deal.
Common questions
Is it better to rent or buy a $500k house?
Over 30 years in this projection, buying comes out about $270,186 ahead — buying ends around $2,259,898 vs renting-and-investing around $1,989,712. It flips based on how long you stay, local price-to-rent, and whether you actually invest the difference.
How much do you need to buy a $500k house?
A 20% down payment is about $100,000, plus closing costs. Less than 20% down usually adds PMI. Renting frees that cash to invest instead — which is the core of the trade-off.
Does renting really mean throwing money away?
No. Rent buys housing without the costs of ownership (property tax, maintenance, transaction costs), and the down payment can be invested. Buying builds equity but ties up cash and assumes appreciation. Neither is automatically "throwing money away."