If you're going to stay less than 5 years, renting almost always wins financially. The culprit: transaction costs. Buying costs 2–5% on entry, 6% on exit. Short stays don't amortize that round-trip.
The transaction-cost math
On a $500,000 home:
- Closing costs (entry) — 2–5%. Budget 3% = $15,000.
- Commission (exit) — typically 6%. $30,000.
- Round-trip total — $45,000 just to buy and later sell. That's 9% of the home's value.
For buying to beat renting, the combination of price appreciation + principal paydown has to overcome that 9%, plus the gap between monthly ownership cost and rent.
Why it takes 5 years
Two forces work in your favor over time:
- Home appreciation — at ~3% per year, that's 15% over 5 years. Covers the transaction costs plus some.
- Principal paydown — early payments are mostly interest, but by year 5 you've built ~7% equity on a 30-year loan.
Combined, a 5-year horizon typically puts you ahead of renting. Shorter, and the transaction costs eat the gains.
When the rule stretches
Break-even stretches beyond 5 years when:
- Mortgage rates are elevated (7%+) — more of each payment is interest.
- Local appreciation is slow or flat.
- Price-to-rent ratios are very high (buying costs far exceed renting).
- HOA or property tax are unusually high.
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