Renting vs. Buying a Home: The 5% Rule

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throw0101c · 2026-05 · Recommendation

Ben Felix, a Canadian portfolio manager that does personal finance videos and podcast, has been arguing for years that rent versus buy is often a wash financially, and that you should make the decision for non-financial resasons. * recent 2026 video: [LINK] * 2025a: [LINK] * 2025b: [LINK] * 2021: [LINK] * 2019: [VIDEO] The 2019 video goes over a handy "5% rule of thumb": start with the purchase price of home, take 5% of that: if your rent is less than that, better numbers-wise to continue renting (and investing the difference); if your rent is more, probably better numbers-wise to buy/own. The company he works for created a tool to examine the numbers: * [LINK]

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Paracompact · 2026-05 · Recommendation

The borrowed money isn't free from interest. There's no numerical sense in borrowing money at 5%+ interest to fund an investment appreciating at 3%. Some schemes might advantage it further (such as leveraging your mortgage with your retirement funds) but then we might as well also discuss further disadvantages compared to renting, such as upkeep and property taxes. Back around 2020 when mortgage rates very briefly dipped below 3%, there could have been an argument. But such is no longer the case and not likely to return soon. This guy breaks down the analysis very cleanly to a first-order approximation, using 2019 figures: [VIDEO] > It's a choice between $1m in housing appreciating at 3% or $100k in stocks appreciating at 9%. Just to drive the point home: It would be $100k in stocks appreciating at 9% and monthly rent subtracted, or $1m in housing appreciating at 3% and a $900k debt growing at 5%+ interest.

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throw0101a · 2022-05 · Recommendation

> You don't need to purchase a home - but historically - if you did - you've been much better off financially. [citation needed] Per the The Credit Suisse Global Investment Returns Yearbook 2018 , the global return for real estate from 1900 to 2017 was 1.3%, while stocks returns 5.2%: * [LINK] Rent is often cheaper than mortgage payments, and is very more often cheaper than mortgage payments plus the cost of maintaining a home. If you take the difference and investment you can have just as must equity in a few decades. Preet Banerjee goes over the math in this ten minute video: * [LINK] He rents: * [LINK] If you want to know when it makes financial sense, the "5% Rule" by Ben Felix is a decent place to start: * [LINK] * [VIDEO] Until recently he was a renter, but purchased a house 1-2 years ago. Not exactly happy with the decision though: * [LINK]

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