# Rent vs buy break-even and the price-to-rent ratio | Should I Rent or Buy

Source: https://shouldirentorbuy.org/guides/break-even-and-price-to-rent/

# Break-even and the price-to-rent ratio

Two quick lenses on the same question: how long until buying wins, and how expensive homes are compared with rents.

## The break-even year

The calculator compares two people each year: one who bought and would sell now, and one who rented and invested the difference. The first year the buyer is ahead is the break-even year. With the example inputs it is year 9.

## Price-to-rent ratio

Divide the price by twelve months of rent for a similar home. The example is $400,000 ÷ ($2,200 × 12) ≈ 15.2. It is a screening number only. It ignores rates, taxes, and how long you will stay.

## What moves the break-even year

- Mortgage rate: higher rates push it later.
- Home value growth: faster growth pulls it earlier.
- Rent growth: faster rent increases pull it earlier.
- Investment return: a higher return on the renter’s savings pushes it later.
- Closing and selling costs: higher costs push it later.

## Questions

### What is the price-to-rent ratio?

Home price divided by a year of rent for a comparable home. A $400,000 home that would rent for $2,200 a month has a ratio of about 15. Higher ratios mean homes are expensive relative to rents, which tends to favor renting.

### Is there a magic break-even number of years?

No. The break-even year depends on the rate, down payment, owner costs, rent growth, home value growth, and investment return. Rules of thumb such as five years are starting points, not answers.

## On this page

- [Break-even year](#breakeven)
- [Price-to-rent](#ratio)
- [What moves it](#levers)

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