Rent vs Buy Spreadsheet: the Real Break-Even

Hey folks, it is Ren here.

On a walk last weekend I passed three open homes on one street, little crowds spilling onto the footpath, and a friend texting me the same question half the country is asking: should we keep renting or just buy.

She had done the sum in her head, rent against the repayment, and decided buying was obviously cheaper.

It almost never is that simple, and a rent vs buy spreadsheet is how you find the honest answer.

"Price is what you pay. Value is what you get." — Warren Buffett

🏠 Why the rent versus mortgage repayment number is the wrong one

Most rent versus buy decisions compare the rent to the mortgage repayment, and that comparison is misleading.

A repayment is not a cost. Part of it pays down your loan, so it comes back to you as equity. Rent is gone the moment you pay it.

But owning has real costs that never come back either, and they rarely show up in the head maths.

• Interest on the loan, which in early years is most of the repayment.
• Council rates, strata and building insurance.
• Maintenance, which averages around one percent of the home value a year.
• The deposit could have earned a return somewhere else.

What a rent vs buy spreadsheet should actually compare

A rent vs buy spreadsheet compares the money you never get back from each choice, not rent against the full repayment.

On the renting side, the unrecoverable cost is simple: it is the rent. On the buying side, it is the interest, the rates, the insurance, the maintenance, and the return your deposit gave up by sitting in the house.

Here is the part almost no calculator spells out. Add up those owning costs and they tend to land near five percent of the property value a year: roughly one percent maintenance, one percent rates and insurance, and around three percent as the cost of the money tied up.

If a year of rent is less than five percent of the price of the equivalent home, renting is the cheaper option that year. If it is more, buying pulls ahead. That single line cuts through most of the noise.

How to build a rent vs buy spreadsheet in one sitting

You can build a working rent vs buy spreadsheet in about thirty minutes with a target property price and a rent figure in front of you.

1. List both unrecoverable costs. Put annual rent on one side, and interest, rates, insurance and maintenance on the other.
2. Add the deposit opportunity cost. Multiply the deposit by a return you could realistically earn, and add it to the owning side.
3. Add the one-off buying and selling costs. Stamp duty and agent fees are large, so spread them across the years you plan to stay.
4. Compare the yearly totals. See which side is cheaper this year, then project it across five and ten years.
5. Find the break-even year. Mark the year owning overtakes renting once the buying costs are absorbed.

That break-even year is the number to remember. Because of stamp duty and agent fees, owning usually does not win until you have stayed somewhere around five years or more.

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🧹 Mistakes that tip the rent vs buy answer the wrong way

• Comparing rent to the repayment. Fix it: compare rent to interest plus rates plus upkeep, not the whole repayment.
• Forgetting the deposit could earn elsewhere. Fix it: add the deposit's opportunity cost to the owning side.
• Ignoring buying and selling costs. Fix it: spread stamp duty and agent fees across your expected years in the home.

Once the comparison points toward buying, the next job is planning the deposit and the true repayment, and the mortgage planning spreadsheet maps the deposit timeline and the real monthly cost before you commit.

🎯 Your action steps this week

• Find the rent and the likely price for the same kind of home.
• List the owning costs: interest, rates, insurance and maintenance.
• Add the deposit's opportunity cost to the owning side.
• Fold the result into your wider plan with a simple budget spreadsheet so the numbers stay connected.

❓ Frequently asked questions

Is it cheaper to rent or buy?

It depends on how long you stay and how the rent compares to the full cost of owning. If a year of rent is less than about five percent of the home value, renting is usually cheaper that year. Owning tends to win only after you have stayed long enough to absorb the buying and selling costs.

What should a rent vs buy spreadsheet include?

It should include annual rent on one side, and on the other the loan interest, council rates, insurance, maintenance and the opportunity cost of your deposit. Add the one-off stamp duty and agent fees, then compare the yearly totals over five and ten years.

Why not just compare rent to the mortgage repayment?

Because a repayment is not all cost. Part of it pays down the loan and returns to you as equity, so comparing it to rent overstates the cost of owning. The fair comparison is rent against the money you never get back from owning.

How many years until buying is worth it?

For most people it is around five years or more. Stamp duty and agent fees are large up-front costs, so you need enough time for the equity you build and the rent you avoid to outweigh them. The break-even year is the key output of the sheet.

The crowd on the footpath is not the decision. The numbers are.

Run them once and the answer for your situation gets very clear.

To your financial freedom,
Ren

This article is for general information only and is not financial advice. It does not take into account your personal situation, needs or objectives. Please consider speaking with a qualified financial adviser before making financial decisions.