Rent vs Buy in California

Buying or renting in California involves more than just comparing mortgage payments to rent: rent goes up, mortgage does not. This calculator accounts for federal and California mortgage tax deductions, SALT deduction from 2025 legislation changes, Prop 13 property taxes, and what your down payment could earn in the stock market if renting.

How This Calculator Works

Two Scenarios, One Question

The calculator compares two paths over any time horizon you choose. Scenario 1 — Buy: you purchase a home, make monthly mortgage payments, and build equity as the property appreciates.Scenario 2 — Rent & Invest: you rent instead, and put your would-be down payment — plus any monthly savings from renting being cheaper than owning — into a stock portfolio. At the end of your chosen period, which path leaves you with a higher net worth?

Key Findings
What the Numbers Tell Us

Based on analysis of Bay Area home prices, stock market history, and California tax rules. Updated Jan 2026.

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The 5% Appreciation Tipping Point

For a $2M home with a 5.5% mortgage and 9% stock returns, buying beats renting once annual property appreciation hits roughly 5% — close to the Bay Area's 30-year average.

$2M house · 5% app. rate → Buy wins
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Lower-Priced Homes Favor Buying Sooner

For a $1.25M home, only ~4.5% annual appreciation is needed for buying to win. A higher share of the mortgage is tax-deductible, reducing your effective borrowing cost significantly.

$1.25M house · 4.5% app. rate → Buy wins
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Buying Gets Less Favorable After ~10 Years

Counterintuitively, after 10+ years the renting-and-investing strategy often catches up or overtakes buying. Mortgage leverage decreases over time as loan balance shrinks, while a stock portfolio compounding at 9% gains momentum.

Stocks compound faster long-term
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Prop 13: California's Hidden Buying Advantage

California's Proposition 13 locks in your property tax based on purchase price, growing at max 2%/year — far below typical appreciation. This becomes a major financial advantage the longer you own.

Tax based on purchase price, not current value
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Mortgage Deduction Lowers Your True Rate

Federal and CA tax deductions on mortgage interest can reduce your effective rate by 1–2 percentage points. Use the Tax Rate Helper tab in the calculator to find your exact number.

5.5% bank rate → ~4.25% after tax deduction
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Stocks vs. Real Estate: Risk Profiles Differ

The 9% S&P 500 average is volatile year-to-year. If you'd invest conservatively in bonds or Treasuries (4–5% return), buying almost always wins. The comparison is closest when stocks return 8–10%.

Bonds at 4–5% → Buying wins easily
Base assumptions used above: $2M home price · 20% down payment · 5.5% bank mortgage rate (4.25% after tax deductions) · 30-year fixed · 1.25% property tax (Prop 13) · 0.7% maintenance · $5,000/mo initial rent · 5% rent growth · 9% stock returns · 10-year comparison window. Adjust any of these in the calculator below.
Interactive Tool

Run Your Own Numbers

Plug in your specific home price, interest rate, and assumptions. Results update instantly.

🏠 Buy — Net Wealth
—
Home equity
📈 Rent — Portfolio
—
Stock balance
Winner
—
Advantage: —
Your Scenario
Edit any green field — results update instantly.
🏠 Buying
%
The annual rate at which the home's market value grows. The Bay Area 30-year historical average is roughly 5–6%. Higher appreciation strongly favors buying — this is one of the most impactful inputs.
%
Use "Tax Rate Helper" tab to calculate. Default 4.25% = 5.5% bank rate after deductions.
This is your bank's stated interest rate reduced by the tax savings from deducting mortgage interest. Because mortgage interest is tax-deductible (federally up to $750k loan, in CA up to $1M), your true cost of borrowing is lower than the bank rate. Use the "Tax Rate Helper" tab to compute this automatically from your actual bank rate and tax brackets.
Grows 2%/yr on purchase price (Prop 13)
California's Proposition 13 caps property tax increases at 2% per year, regardless of how fast the home's market value grows. The tax is based on the purchase price, not current value — a major advantage of buying in CA. Typical rate at time of purchase is 1.0–1.3%.
Applied to current property value each year
Covers home insurance (~0.2–0.4%), ongoing repairs and maintenance (~0.3–0.7%), and HOA fees if applicable. Unlike property tax, this scales with the home's current market value each year. For a $2M home at 0.7%, that's ~$14,000/yr initially.
📈 Renting + Investing
%
The rate at which your monthly rent increases each year. Rents in high-demand markets like the Bay Area historically track property appreciation closely. Setting this lower than the appreciation rate simulates a landlord-friendly market; setting them equal is the neutral assumption.
%
S&P 500 100-year average: 9–10%
The annual return on the renter's invested portfolio (down payment + annual savings). The S&P 500 has averaged ~9–10% per year over 100 years. Note: stock returns are volatile year-to-year unlike home values. If you prefer safer investments (bonds, treasury), use 4–5%, which will make buying look better.
📅 Comparison Period
yrs
Computed
Loan Amount —
Monthly Payment —
Net Wealth Over Time
Home equity (buying) vs stock portfolio (renting + investing). Renter's portfolio is seeded with the down payment on day 1.
Year-by-Year Breakdown ▼ Show
Hard to Quantify Factors
  1. You may be able to refinance at a lower rate later (+1 Buying).
  2. As mortgage leverage reduces, buying gets worse. Theoretically you can reverse this by taking a home equity loan to invest in stocks.
  3. Cost of selling (realtor fee, county tax) is not included.
  4. You get up to $500k profit tax-free when selling a primary residence, and 1031 exchanges are available for RE but not stocks.
  5. Renting gives freedom to move anytime. Buying lets you customize your home.
Also Available

Explore in Google Sheets

Prefer working in a spreadsheet? Use the original Google Sheet that inspired this calculator — view-only or directly editable.

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View Only

View-Only Sheet

Browse the full model with all formulas. Make a copy to your own Google Drive to edit freely.

tinyurl.com/buyvsrentca
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Public Editable Sheet

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