Rent or buy a home: How we calculate
Compare renting and investing the difference with buying and later selling.
How we calculate
The buyer keeps property value less selling costs and debt. The renter invests the avoided initial cash and monthly cost difference; the deposit is returned at the end.
What the figures mean
- Cash flow
Money received less money paid during a period. It can differ from accounting profit; investment outlays are negative and receipts positive.
Simple example: €1,000 received less €700 paid gives a cash flow of +€300.
- Owners’ equity
In company accounts, assets less liabilities. In a property investment, your initial equity is your own money; the estimated value of your stake can differ from that amount.
Simple example: Company assets of €100,000 less €60,000 liabilities leave €40,000 of book equity.
Example: the same monthly budget
The comparison uses the same starting capital and monthly budget. The renter’s initial portfolio equals the buyer’s down payment and acquisition costs, minus the rental deposit. If mortgage payments plus owner costs total €900 per month and rent is €700, the renter adds €200 per month to the portfolio.
With unchanged monthly costs and zero investment return, these additions total €2,400 over a year. If rent exceeds the owner’s monthly costs, the difference reduces the portfolio. This example alone does not decide which option wins.
What is compared at the end?
Buyer wealth is the future property value minus selling costs and the remaining loan balance. It is compared with the renter’s investment portfolio and returned deposit. Changes in rent, property prices and investment returns are entered assumptions rather than guaranteed outcomes.