Rent vs Buy Assumption Guide
Home appreciation is one of the most influential and uncertain assumptions in a rent-versus-buy model. This example changes only that rate so you can see how much the result depends on future home values.
By Ethan Hayes Published
At Year 30, higher appreciation increases modeled net home-sale proceeds, while lower appreciation narrows or removes that advantage. Because appreciation is uncertain, a decision should remain workable across more than one rate.
Using the same $500,000 purchase example, the table changes only annual home appreciation. The renter portfolio remains unchanged because the rent, investment-return, and contribution assumptions stay fixed. The home figure represents estimated proceeds after the remaining mortgage and modeled selling costs, not the headline property value.
| Home appreciation | Net home-sale proceeds | Renter portfolio | Modeled outcome |
|---|---|---|---|
| 0% appreciation | $475,000 | $794,106 | Renting +$319,106 |
| 3% appreciation | $1,152,950 | $794,106 | Buying +$358,844 |
| 5% appreciation | $2,052,923 | $794,106 | Buying +$1,258,817 |
Only home appreciation changes between the rows above. These inputs remain constant so the sensitivity comparison isolates that one assumption.
| Input | Assumption |
|---|---|
| Home price | $500,000 |
| Down payment | $100,000 (20%) |
| Mortgage | 6.5% fixed for 30 years |
| Starting monthly rent | $2,800 |
| Annual renter insurance | $250 |
| Annual property tax | $5,500 |
| Annual homeowners insurance | $1,600 |
| Annual maintenance reserve | $4,000 |
| Monthly HOA dues | $0 |
| Annual HOA growth | 0% |
| Upfront purchase taxes | $0 |
| Legal and closing fees | $3,000 |
| Annual property-tax growth | 2% |
| Mortgage insurance | None |
| Annual rent growth | 3% |
| Annual home appreciation | Varied: 0%, 3%, and 5% |
| Annual investment return | 6% |
| Selling costs | 5% of sale price |
The spread between the rows shows appreciation risk. If buying only comes out ahead under the strongest rate, the conclusion is highly dependent on a favorable housing market. If the result remains acceptable at zero or modest appreciation, it is less dependent on price growth.
This table does not predict a local market. It isolates one variable so you can see how strongly it influences the result.
Use the calculator to test appreciation together with the assumptions that affect the other side of the comparison. Holding period, selling costs, rent growth, investment return, maintenance, and property taxes can all change the outcome.
Higher appreciation increases the modeled future home value and net sale proceeds, which can make buying look stronger. Lower appreciation reduces that advantage. The result still depends on the mortgage, selling costs, rent growth, and renter investment returns.
Use a conservative range rather than one forecast. Historical regional averages can provide context, but a specific property and holding period may perform differently. Testing zero, moderate, and stronger appreciation shows how dependent the result is on this assumption.
No. Home prices can rise slowly, remain flat, or decline, especially over shorter holding periods. Appreciation is an assumption in this model, not a promise or forecast.
Worked examples are calculated from the assumptions shown on this page, and results are rounded only for display. Use the linked calculator to test a complete scenario with your own property and financing estimates.
These estimates are for educational purposes and are not lending, tax, legal, or financial advice. Actual mortgage terms, property costs, investment returns, and home values can differ materially.
This example is a starting point. Change the inputs in the calculator before making a housing decision.
Test your appreciation assumptions