Buy vs Rent Starter Home Retrospective

5 years ago, I decided to buy a starter home, knowing that I planned on getting married, starting a family, and outgrowing the home within 5-7 years. Pretty much everything went according to plan; I got married, had a kid, and sold the house just over 5 years later. All in all, I saved $47,435 by buying vs. renting, which worked out to an average savings of $777 per month. This post explores the real costs associated with owning the home, and compares them to what it would have cost to rent a similar home.


My starter home was a 3 bedroom, 2 bathroom ranch located in Cary, NC. I bought the home for $231,900 in April 2015 and sold it for $310,000 in May 2020, which puts average appreciation at 5.72% APR. Here is a detailed Google spreadsheet of the comparison.

Buying For Sale by Owner

It was a seller’s market when I bought, and similar homes on the local Multiple Listing Service (MLS) were going for over-asking price. I bought a for-sale-by owner home, and I did not have a buyer’s agent.

I learned a lot about the real estate process by doing this, but I would not do it again. I think that the deal was fair, but there was a lot of legwork involved in coordinating directly with the seller, who wasn’t particularly knowledgeable about the process.

The end result was that the seller saved 5-6% by not paying realtor fees, and I may or may not have saved any money by buying a less-contested home, since many Buyer’s Agents won’t show a For Sale by Owner home.

15-year VA Loan

I opted for a 15-year mortgage so that I could build equity quicker. The loan APR was 2.875%. I was eligible for a VA Loan, and opted to put $11,595 (5%) down which required a 1.65% funding fee of $3,855 that was rolled into the financing.

PMI on a conventional loan would have only been around $50/mo for around 3 years, which would have cost $1,800 and required no funding fee. The rate would have likely been 0.125-0.25% higher which would have cost $734-$1,944 more in interest.

Looking back, a VA Loan plus funding fee ended up being about the same total cost as a conventional loan, and the conventional loan would have been less paperwork.


I spent $29,375 on major additions/repairs during my tenure at the home, including building a fence, building a stone fire pit, replacing the HVAC, replacing the roof, and painting the interior and exterior. There were many smaller expenses as well, such as landscaping, pest control plans, and turf care plans.

Renters do not pay any of these costs, but also would probably not be able to convince their landlord to add additions such as nice landscaping or a stone fire pit.

House Repairs

Maintenance costs worked out to 2.09% average annual cost of the home’s value. I learned that it is difficult to work unplanned large projects such as roof replacement into a budget, so with my next home I will save 1% of my home’s value annually for large projects.

PITI plus Maintenance

Principal, Interest, Taxes, Insurance, Maintenance (PITI) includes all costs associated with the loan.

Adding Maintenance to PITI gives us a good total to compare against monthly rent.

Periodic Cost Total Avg Annual Avg Monthly Avg Annual % Cost
Principal $64,340 $12,646 $1,054
Interest $28,410 $5,584 $465 2.02%
Tax $11,600 $2,280 $190 0.83%
Insurance $4,179 $821 $68 0.30%
PITI $108,528 $21,331 $1,778
Maintenance: $29,375 $5,774 $481 2.09%
PITI + Maintenance $137,903 $27,105 $2,259

Closing Costs and Appreciation

I spent $3,678 on closing costs when buying the home, and $19,905 in closing costs (mostly realtor fees) when selling the home.

The house appreciated $78,100 over the period that I owned it, which works out to a 5.72% APR.

Cost of Renting

A comparable home would have cost an average of $1,450 per month to rent. Buying PITI + Maintenance costs $2,259 per month, so renting would have cost $809 less per month.

To keep things even in the renting scenario, I’m going to assume that the down payment and buying closing costs totaling $15,273 is invested at an 8% APR, and that the additional $809 per month in savings by renting is contributed to the investment each month.

Buying Monthly Cost (PITI + Maintenance) $2,259
Renting Monthly Cost $1,450
Initial Investment (Closing Costs + Down Payment) $15,273
Investment Monthly Contribution (Rent vs Buy Savings) $809
Investment Rate (APR) 8%
Investment Future Value $82,840
Investment Principal $64,651
Investment Appreciation $18,189

Comparison with Renting

To compare buying with renting, I am doing the following:

  • Buying: add all costs - PITI + Maintenance, and Closing Costs. Then subtract the equity portions, Principal and Appreciation.
  • Renting: add cost of renting, subtract Investment Appreciation.
Comparison Total Avg Annual Avg Monthly
Buying House
   + PITI + Maintenance $137,903 $27,105 $2,259
   + VA Funding Fee $3,855
   + Buying Closing Costs $3,678
   + Selling Closing Costs $19,905
   - Principal -$64,340
   - Appreciation -$78,100
   = Buying Net Cost $22,901 $4,501 $375
Renting House
   + Rent Cost $88,525 $17,400 $1,450
   - Investment Appreciation -$18,189
   = Renting Net Cost $70,336 $13,825 $1,152
Savings by Buying over Renting $47,435 $9,324 $777

Buying saved $47,435 in total over renting, or $777 per month.

Return on Investment (ROI)

Robert Kiyosaki says “your house is not an asset” in his book “Rich Dad, Poor Dad”. His point becomes clear when looking at the cash flows. The the ROI is negative in each case, at -15.0% for buying and -45.9% for renting.

Return on Investment Total Avg Annual Avg Monthly
Buying House
   + Down Payment $11,595
   + Buying Closing Costs $3,678
   + PITI + Maintenance $137,903 $27,105 $2,259
   = Cash Used in Buying $153,176 $30,107 $2,509
   - Cash Provided by Sale of House -$130,275
   = Cash Spent on House $22,901
   Buying ROI -15.0%
Renting House
   + Rent $88,525 $17,400 $1,450
   + Investment Principal $64,651
   = Cash Used in Renting $153,176 $30,107 $2,509
   - Cash Provided by Sale of Investment -$82,840
   = Cash Spent on Rent $70,336
   Renting ROI -45.9%

I’ve got to live somewhere though, and I’m not into the whole renting out my couch thing. In this case, buying provided a nice savings compared to renting for my starter home!

Check out the Google spreadsheet of the comparison for all of the calculations used in this post.