Rent vs. buy is not a simple answer — it depends on your numbers. Adjust the inputs to find your personal break-even year and true net cost.
Buy net cost = total paid − equity gained above down payment
Almost everyone asks the question as a monthly comparison — is the mortgage more or less than the rent. That framing cannot answer it, because buying front-loads its costs and recovers them slowly. The output that answers it is the break-even year.
This page explains what moves that number, so you can see which of your assumptions the answer is actually resting on.
Proposition 13 caps growth in your assessed value at two percent a year while ownership is unchanged. Market rents carry no equivalent cap. Over a long hold those two lines diverge substantially in the owner's favour — which is the strongest structural argument for buying in California, and worth nothing at all to somebody who moves in three years.
AB 1482 caps annual rent increases for covered properties at five percent plus local CPI, to a ceiling of ten percent, with just-cause protections. But the exemptions are broad — housing built within the preceding fifteen years on a rolling basis, and many single-family homes and condominiums not owned by a corporation. Check which regime covers the specific unit before treating rent as predictable in your model.
The break-even point is the year at which the total cost of having bought falls below the total cost of having rented over the same period. It matters more than the monthly comparison because buying front-loads its costs: you pay the purchase costs on day one and the selling costs at the end, and those are spread across however long you stay. Compare monthly figures and buying often looks worse than it is. Compare total cost to a specific year and you get an answer you can act on — because the real question is not 'is buying better' but 'is buying better for how long I will actually be here'.
How long you stay, by a wide margin. Transaction costs are large and fixed, so they dominate a short horizon and become almost irrelevant over a long one. After that: the gap between rent and the unrecoverable part of ownership — interest, property tax, insurance, maintenance, dues — not the gap between rent and the whole mortgage payment, since principal is not a cost. Then the opportunity cost of the down payment, which is the input people most often set to zero and shouldn't.
Because they are different kinds of money. Interest is gone — it buys you the use of the lender's capital, exactly as rent buys you the use of someone's property. Principal moves money from your bank account into your equity; it is a transfer, not a cost. Calculators that compare rent against the whole mortgage payment overstate the cost of owning, and are usually built by someone who benefits from you renting.
It bends it toward buying, but only if you actually stay. Once you buy, your assessed value can rise no more than two percent a year while ownership is unchanged, whereas market rents carry no such cap. Over a long hold those two lines diverge substantially in the owner's favour. This is the strongest structural argument for buying in California specifically — and it is worth nothing to somebody who moves in three years.
It reduces, but does not remove, the risk of a sudden increase. The Tenant Protection Act caps annual rent rises for covered properties at five percent plus the local change in consumer prices, subject to an overall ceiling of ten percent, whichever is lower, and adds just-cause protections. The exemptions matter as much as the rule: housing built within the preceding fifteen years is generally exempt on a rolling basis, as are many single-family homes and condominiums not owned by a corporation. Establish which regime covers the specific unit before you assume rent stability in the model.
Four things, consistently. They compare rent to the full mortgage payment rather than to the unrecoverable portion. They set the opportunity cost of the down payment to zero. They use a national closing-cost percentage, which is close to meaningless in California where transfer tax is set at up to three levels and who pays it is county custom. And they ignore the supplemental property tax bill, which arrives after reassessment on sale and is not in anyone's first-year budget.
Cautiously, and never as the reason. Appreciation is the one input nobody can know, and a comparison that only works because of an assumed growth rate is not a comparison, it is a bet with extra steps. A useful discipline: run the model at zero appreciation. If buying still makes sense on your horizon, the decision is robust. If it only works at an optimistic rate, you have learned something important about how much risk the plan carries.
For the full reasoning behind treating costs as recoverable or not, see the honest comparison. For the purchase side of the arithmetic, the closing costs page sets out what California actually charges.
General information, not financial advice. This tool models a comparison from the figures you supply; it does not forecast prices, rents or rates, and no output from it should be read as a prediction.