Real Estate
Equity, leverage, and wealth through property.
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Rent vs Buy Break-even Math
The "Break-even" point is the year when the total cost of owning a home—including interest, taxes, maintenance, and insurance—becomes lower than the total cost of renting a similar property. Our model accounts for a $3\%$ annual appreciation rate and the opportunity cost of your down payment. Generally, if you stay for $7+$ years, ownership builds significantly more wealth than renting.
Home Affordability Logic
Lenders typically use two ratios: the Front-End ($28\%$) and Back-End ($36\%$) debt-to-income ratios. This calculator provides a 'Recommended' price based on a conservative $28\%$ of gross income, and an 'Aggressive' price that reaches the $36\%$ limit. Remember, being 'house poor' can restrict your ability to invest in other asset classes.
Rental ROI & Cap Rate Math
The Capitalization Rate (Cap Rate) is the net operating income divided by the purchase price. It measures the unleveraged return on a property. A "good" cap rate varies by market, but most investors target $5-8\%$ for residential properties. This tool subtracts taxes and maintenance fees to give you a realistic cash-on-cash perspective.
Closing Cost Estimation
Closing costs typically range from $2\%$ to $5\%$ of the home's purchase price. This includes origination fees, title insurance, appraisal fees, and government recording taxes. While often overlooked, these costs must be paid in cash at settlement, so they should be budgeted separately from your primary down payment.
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