Buying a Property - Cost Benefit Analysis

The decision to rent or buy is an age-old debate that is far from simple.

Many considers renting “throwing money away” while buying is an investment. Owning your home gives you a sizeable asset, but it does come at a massive cost, both upfront and over the long run.

Renting offers some financial freedom and more flexibility. Your landlord is responsible for home maintenance & repairs, insurance, property taxes and all other costs.

Considering whether to rent or buy a house? Use the tool below; it's designed to simplify the initial calculations and assist you in making a more informed decision.

NOTES: * Denotes a recommended value
Numbers in brackets are negative

Property – Price & Rent

Currency

Study period (years)

Property price (USD)

Property upgrade (USD)

Are you going to spend more to renovate or remodel your property?

Average annual house value growth rate

First year rent

Average annual growth rate of rent

Discount rate

It is widely accepted that the value of money today is greater than its value in the future. This means that money received at a later time is not as valuable as the same amount received today. This concept is not related to inflation, hence even if inflation is zero, we would still prefer to receive money today than the same amount of money after some time. This is primarily because we can put the money to use today in various ways such as learning a new skill, purchasing a laptop for work, or investing the money to watch it grow.
This tool helps in calculating the present value of future cash flows. The discount rate determines the value of future benefits; a higher discount rate implies that the value of benefits decreases with time. Simply speaking, you may use the interest rate offered by commercial banks on deposits as the discount rate. If you don't want to discount future cash flows, you can set the discount rate to zero.

Loan Information

Loan period in years

Loan period in months

Interest rate

Percentage of down payment

It is assumed that the loan covers only the property value. Thus, the loan does not cover the upgrade cost

Closing Costs (USD)

Property transfer tax

Agent commission

Inspection and appraisal fees

Mortgage fees

Attorney fees

Other expenses, please specify

Yearly Operating Expenses (USD)

First year service cost

This is a recurring fee property owners pay for managing and upkeep of buildings or communities.

Expected annual increase in service cost

First year repair & maintenance costs

Expected annual increase in repairs

First year property tax

Expected annual increase in property tax

First year insurance cost

Expected annual increase in insurance cost

Other yearly expenses

Expected annual increase in other expenses

Results

Mortgage Calculations
Loan
Debt monthly payment
Yearly debt cost (annuity)

Running Costs
Service cost
Repairs & renovations
Year property tax
Insurance cost
Other expenses

Payment Breakdown (nominal)
Invested money
Closing costs
Loan payment
Interest
Running costs
Total cost of ownership (nominal)
Total amount of saved rents (nominal)
Net savings (Total saved rents minus total cost of ownership)
Will you sell the property?
Estimated property value (nominal)
Net cash flow

Should I Just Save My Money?
Invested money
Saving account after years Assuming the interest rate is equivalent to the discount rate

Payment Breakdown (discounted)
Total cost of ownership (discounted)
Total amound of saved rents (discounted)
Net savings (discounted)
Will you sell the property?
Estimated property value (discounted)
Net cash flow

Cost of Rent vs Ownership ()

Discounted - Cost of Rent vs Ownership in ()

Percentage of Total Investment (undiscounted)

Input

Property – Price & Rent
Currency
Study period (years)
Property price (USD)
Property upgrade(USD) Are you going to spend more to renovate or remodel your property?
Average annual house value growth rate
First year rent
Average annual growth rate of rent
Discount rate

Loan Information
Loan period in years
Loan period in months
Interest rate
Percentage of down payment It is assumed that the loan covers only the property value. Thus, the loan does not cover the upgrade cost

Closing Costs	USD
Property transfer tax
Agent commission
Inspection and appraisal fees
Mortgage fees
Attorney fees
Other expenses, please specify

Yearly Operating Expenses	USD
First year service cost This is a recurring fee property owners pay for managing and upkeep of buildings or communities.
Expected annual increase in service cost
First year repair & maintenance costs
Expected annual increase in repairs
First year property tax
Expected annual increase in property tax
First year insurance cost
Expected annual increase in insurance cost
Other yearly expenses
Expected annual increase in other expenses

Output

Mortgage Calculations	USD
Loan
Debt monthly payment
Yearly debt cost (annuity)

Running Costs
Service cost
Repairs & renovations
Property tax
Insurance cost
Other expenses

Payment Breakdown (nominal)
Invested money
Closing costs
Loan payment
Interest
Running costs
Total cost of ownership (nominal)
Total amount of saved rents (nominal)
Net savings > (Total saved rents minus total cost of ownership).
Will you sell the property?
Estimated property value (nominal)
Net cash flow

Should I Just Save My Money?
Invested money
Saving account after 0 years Assuming the interest rate is equivalent to the discount rate

Payment Breakdown (discounted)	USD
Total cost of ownership (discounted)
Total amound of saved rents (discounted)
Net savings (discounted)
Will you sell the property?
Estimated property value (discounted)
Net cash flow