Investor Corner/Money matters beyond investing/Personal Finance Adjacent
4.4.4 Rent vs Buy
Renting keeps capital flexible and available to be invested elsewhere. Buying builds equity in an asset you live in, but ties up a large sum and adds ongoing costs. Neither is automatically superior once the full cost of each is compared fairly.
Why the comparison is rarely done fairly
A common mistake is comparing a monthly rent payment directly against a monthly loan instalment, while ignoring the sizeable down payment, stamp duty, registration costs, and ongoing maintenance that come with owning, and equally ignoring the return that the down payment could otherwise have earned had it stayed invested instead of going into a property.
What a genuinely fair comparison includes
On the buying side: the down payment's opportunity cost, loan interest over the full tenure, property tax, maintenance, and the eventual, uncertain appreciation of the property. On the renting side: the rent itself, and the return that the money not spent on a down payment could have earned if invested instead over the same period. Only comparing the full picture on both sides gives a fair answer.
Why the right answer varies by person and city
Property appreciation rates differ enormously by city and neighbourhood, and personal factors such as job stability, expected duration of stay, and comfort with a large loan commitment all matter as much as the pure financial math. There is no universally correct answer, only a fair calculation applied to your own specific numbers and circumstances.
How PriLytics helps. PriLytics tracks the return on your invested capital over time, giving you the real numbers needed for the investing side of this comparison. See performance over time.