Buy a Home or Rent and Invest?
Most rent-versus-buy calculators compare only your monthly payments, ignoring what happens when a renter invests their initial deposit into a diversified stock index. This tool compares total net worth over time under an identical cash flow rule: both households spend the exact same amount of cash every month.
On these assumptions, buying a home ends approximately 447 446 Kč ahead after 20 years (about 273 063 Kč in today's money).
What flips the answer? (Sensitivity Analysis)
The exact threshold at which the financial outcome reverses, holding all other variables constant:
Buying wins if property prices grow faster than 2.77 % / year (you assumed 3.0 %).
Renting wins if investment returns exceed 7.31 % / year (you assumed 7.0 %).
Buying wins if starting monthly rent exceeds 21 294 Kč (you assumed 22 000 Kč).
Buying wins if mortgage rate drops below 5.15 % (you assumed 4.90 %).
Simulation Inputs
Adjust inputs to model your specific purchase price, rent level, and expected market returns:
Yearly Net Worth Trajectory
Comparing the wealth of both households at 5-year intervals:
| Year | Buyer Net Worth | Renter Net Worth | Mortgage Balance | Difference |
|---|---|---|---|---|
| Year 5 | 2 540 942 Kč | 2 616 435 Kč | 4 768 281 Kč | -75 493 Kč |
| Year 10 | 4 256 411 Kč | 4 141 578 Kč | 4 216 982 Kč | +114 832 Kč |
| Year 15 | 6 310 002 Kč | 6 012 996 Kč | 3 512 983 Kč | +297 006 Kč |
| Year 20 | 8 827 335 Kč | 8 379 889 Kč | 2 613 987 Kč | +447 446 Kč |
How this comparison works
To make the comparison mathematically fair, the model enforces strict cash flow parity between both households.
In month zero, the buyer pays a down payment plus non-recoverable transaction fees (such as notary, valuation, and legal costs). The renter takes that exact same initial lump sum and deposits it into an investment portfolio (such as a low-cost global stock index ETF).
Each subsequent month, both households spend the identical total amount on housing. The buyer pays mortgage principal, mortgage interest, property maintenance, and fixed owner costs (insurance, property taxes, building maintenance fund). The renter pays rent and any renter costs.
Whichever household spends less on housing in a given month takes the cash difference and invests it into their investment portfolio. At the end of the simulation horizon, the buyer's net worth is calculated as the property's market value minus remaining loan balance minus selling costs, plus their side investment portfolio. The renter's net worth is their total compound investment portfolio.
What this tool leaves out
Financial models simplify the real world. A decision to buy or rent involves significant non-financial factors that cannot be captured in a spreadsheet:
- Non-financial reasons people buy: Security of tenure, freedom to decorate or renovate, stability for children in school districts, and the certainty that a landlord cannot terminate your lease or increase rent arbitrarily.
- Non-financial reasons people rent: Freedom to relocate quickly for higher-paying career opportunities, flexibility to downsize or upsize as family needs change, and zero responsibility for unexpected building repairs or boiler replacements.
- Interest rate fluctuations at refixation: This simulation assumes a constant mortgage interest rate over the loan duration. In reality, mortgage rates reset at each fixation period, which can significantly alter monthly payments up or down.
- Market volatility and leverage risk: Property and stock markets do not grow in a smooth geometric curve. A mortgage is financial leverage: if home prices fall 10 percent on a home bought with a 10 percent deposit, your initial equity is wiped out completely.
- Tax treatment: Tax rules vary drastically by jurisdiction, including mortgage interest deductions, capital gains tax exemptions on primary residences, and local dividend taxation.
- Forced sales and vacancy: Unforeseen personal crises (divorce, job loss) can force an illiquid home sale at an unfavorable market moment, incurring substantial transaction discounts.
What moves the financial result most
Across thousands of simulations, three variables consistently determine which path builds more wealth:
1. The Return Spread
The gap between long-term stock market returns and residential property price growth. If diversified equities outperform property by 3% or more per year, renting and disciplined investing often overcomes mortgage amortization.
2. The Price-to-Rent Ratio
When property purchase prices are 300 to 400 times monthly rent (common in major European cities like Prague, Munich, or Paris), renting is economically cheaper on a cash-flow basis, freeing up significant capital for compounding.
3. Length of Stay
Transaction fees on property (legal fees, transfer taxes, agency selling commissions) typically consume 4% to 8% of the property value across the purchase and sale. Staying less than seven years rarely allows enough time to overcome these sunk costs.
Related guides and resources
- Sumio vs a Spreadsheet for Wealth Tracking – Compare tracking your balance sheet in Excel versus on mobile.
- Free Net Worth Calculator – Audit your current assets, liquid reserves, and debt ratios.
- Compound Growth Projection Prompt – Run custom wealth growth projections in ChatGPT or Claude.
Whichever path you choose, Sumio tracks the result
Sumio tracks your net worth, real estate equity, investments, and mortgage debts privately on your phone, with automatic price updates across 50+ markets and 100+ currencies. The free tier includes up to 5 assets and unlimited liabilities.
This is general information, not financial or legal advice. Sumio is made by Fiduciary s.r.o., a software company, not an adviser or broker.