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Why you should rent not buy

Why you should rent not buy


We have lived in our high-rise apartment since 2015. Rent is $1,950/month, and we are happy with it. Common questions we get asked include “When are you guys going to buy?” or “Why haven’t you guys bought a place yet?”

To answer these questions, let’s do some math! But first, some things to chew on.

Factors we considered in deciding to rent vs to buy


Living in a high rise gives us peace of mind. We have a doorman and cameras to monitor who comes in and out. The front door is access controlled. We sleep well at night many floors up knowing that no one is going to break in through one of the windows.


We aren’t sure where we will be in the medium (3-7 years) term, so we like the option to move whenever we want without paying an agent 6% of our home to do so.

Our needs are met with our current studio apartment. Someday when we have a child, we’ll upgrade to a two-bedroom apartment. When we need more space, we can upgrade to three bedrooms or four. We can do this in short order and without paying someone 6% every time we move.

Shared Costs

We pay a fixed charge of $80/month for internet, cable, a modem, a DVR, and HBO. That’s less than I paid at any other apartment I’ve ever lived in.

Our building has a gym and rooftop recreational area. Thus, paying for a gym membership each month isn’t necessary. When we have guests over or want to grill during the summer, we can hang out upstairs on the roof.


By renting, we don’t have to pay the ridiculously high property tax rates in Chicago. An apartment like the one we live in currently costs ~$280,000, meaning you could pay 2%+ or over $5,600 in property taxes each year!

Let’s do some math

I’m going to compare the cost of owning a 2BR/2BA condo I came **this** close to buying last year to renting. Instead of comparing it to our current apartment, I’ll increase the rent amount by looking at a price:rent ratio.

One final note before we dive into the numbers. We live in the Midwest, so for some of you, these numbers will seem high, while for others, they will seem low. The point is to show the framework for thinking through a buy vs. sell scenario with real life numbers.


Purchasing a 2BR/2BA condo
  • $550,000 purchase price
  • 30 year fixed price mortgage, 4% interest
  • 20% down payment
  • Results in monthly payment of: $2,101
  • $15,000 in closing costs
  • 2.0% property taxes
  • $500/month HOA dues
  • 1.00% maintenance per year
  • 0.25% insurance per year
  • Property increases with inflation
  • Tax deductions for property taxes of $5,000 (assume other $5,000 in state income tax) and mortgage interest
  • 37% tax bracket
Renting assumptions
  • Price:Rent = 18:1 (googled around a bunch of websites showing ranges between 14x – 21x)
  • $300 non-refundable fee
  • $150 annual renter’s insurance annual fee
  • 20% down payment invested in the stock market
  • Rent/homeowner differences also invested in the stock market
  • Results in monthly payment of: $2,546
Other assumptions:
  • Inflation of 2.5%
  • Stock market return of 7%

What’s the end result?

Based on our assumptions, the cumulative costs of buying vs. renting is displayed graphically below. As you can see from above, the 2.0% property tax rate in Chicago, home maintenance costs, and homeowner’s association dues, significantly inflates the cost of buying a home.

Right out of the gate you come out behind buying because of the large down payment you have to put down to purchase the home. Because the costs of owning continue to be higher than renting, even after rent increases, the spread between owning and renting actually increase with time.

Total Cost Rent vs Buy

After 30 years, your mortgage will be paid off. But what does the overall portfolio picture look like?

Portfolio Value Rent vs Buy

By taking the savings you achieved from renting and investing them in the stock market, your overall portfolio value eclipses that of the home’s appreciation after 30 years.

Not only do you maintain flexibility by renting, but your overall wealth is greater at the end of the forecast period.

Parting thoughts

There are a lot of assumptions that go into an analysis such as this. Two main factors that may make this analysis different from your living situation is the high property tax rate in Chicago and the high homeowner association dues ($500 is a low estimate for Chicago).

One point the analysis drives home is that there are many costs that go into home ownership, and that universally proclaiming that buying is less expensive than renting is dangerous.

One common critique likely will be the assumption that the stock market increases year over year. The same critique could be applied to property values. The two asset classes are correlated.

You can download the Excel spreadsheet behind the numbers here and change the assumptions to match your “live” ones. Let us know what you think. We’ll likely be renters in the city for the foreseeable future.


Have you run these numbers yourself? What are your thoughts on buying vs. renting?


  1. I can’t argue your conclusions for a place like Chicago. It really points out the stark contrast between city dwellers who pay an exhorbitant amount for living quarters and us in the flyover states that by comparison live in mansions for one fourth the cost. Then there is the quality of life argument which would separate you millennials from older guys like me. I would find life in a crowded city to be suffocating and you would find life here in the woods to be uncultured and boring. I think we are both pretty happy with our choices and yours sounds exactly right for you, as mine is for me.

    1. Yep, you need to run the math wherever you are and there is no one rule fits all given the economic diversity of our awesome country.

      I like the city sometimes. The high paying jobs usually are concentrated here. But I grew up in the suburbs of a flyover state and I fully expect to trade my high rise for cheaper, more comfortable living someday.

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