The Hidden Math Behind Renting vs Owning

As both a full-stack developer and landlord, I model rent-vs-own the way I model systems: identify inputs, define flows, stress-test failure modes. Here is the practical math I use for clients along the Wasatch Front.

Core Definitions

• Opportunity cost: what your down payment could earn elsewhere (T-bills, index funds).
• Equity velocity: speed at which equity grows (amortization + appreciation − costs).
• Effective rent: gross rent minus concessions, plus expected increases.

Quick Model (Inputs)

• Purchase price, down payment, rate, term
• Property tax, insurance, maintenance, HOA
• Expected appreciation and rent growth (use conservative Utah history: ~3–4%)
• Alt return on down payment (e.g., 4–5% T-bill, 7–9% index)

Flow: Renting vs Owning

Down payment → (invest elsewhere?) → grows at alt return
Mortgage → P&I + taxes/ins/HOA/maint → compare to rent
Equity velocity → amortization + appreciation − carry costs
Breakeven → when equity outpaces invested-down-payment scenario

Stress Tests (Do This Before Deciding)

• Rate +1% and +2% (if ARM/refi risk).
• Appreciation at 0–2% (flat market years).
• Maintenance at 1–1.5% of property value annually (older homes near 2%).
• Alt return at 4–5% (T-bills) and 7–9% (index) to see opportunity cost.

Utah-Specific Considerations

• Property taxes can reset post-sale; underwrite a jump year 1.
• Snow + sun swings: roof/HVAC lifecycle can be shorter; pad maintenance.
• Transit/schools drive rent deltas more than year-built; compare by corridor.

Developer’s Angle

• Model in a spreadsheet with explicit scenarios; do not bury assumptions.
• Create a simple dashboard: monthly carry vs invest-alt-path; project 5/10-year outcomes.
• Use sensitivity toggles (vacancy for house hacking; refi timing; PMI drop-off).

Decision Rule

Owning usually wins when equity velocity (amortization + conservative appreciation) beats the opportunity cost of investing the down payment elsewhere, after subtracting the ownership friction (maintenance, tax, insurance, HOA). Renting wins when stability plus invested down payment outperforms and lifestyle flexibility matters more.

Takeaway

Decide with math, not memes. Run the scenarios, stress-test the weak spots, and choose based on equity velocity versus opportunity cost. Utah or elsewhere, the framework holds.