Buy vs Rent: What's Inside

In this article, you will learn what is inside your Buy vs Rent report. If you need help creating your report, check out our step-by-step guide by clicking here. 

Net Gain by Buying a Home

The Net Gain includes the appreciation gain, amortization gain, cashflow difference, closing costs, any tax benefits, and cost to sell at the end of the review period. The default review period is 9 years; however, it can be adjusted by moving the purple slider, shown below. The review period represents the number of years the home buyer will own the home.

Below the Net Gain Chart, you will find a summary of each component based on the number of years you selected with the slider. 

Appreciation Gain is the difference between the home’s future value and current value. The summary displays the average annual rate of appreciation and the home’s projected value at the end of the review period. You can select the appreciation calculation you would like to use by following the instructions below:

1. Select Edit in the top right-hand corner of the page.
2. Click Edit under Property. 
3. Choose between Forecast, Historical, or create your own custom appreciation calculation. 
4. Click Save. 

Amortization Gain is equity accumulated from principal payments. This summary will display the original loan amount and the remaining principal amount due. You can get a snapshot of how the amortization schedule will change by adding additional payments by following the steps below.

1. 1. 1. Click View under Amortization Gained. 
      2. Click + Payment.
      3. Add the additional payment amount:
         • For additional monthly payments to the principal amount, enter the amount within the first box.
         • To add a lump sum payment, choose what payment number you would like the payment to be applied with and the payment amount. 
         • If you would like to re-amortize the mortgage with the new lower balance after making a lump sum payment towards the principal amount, check the Recast box.
      4. Click Save to add additional payments to the amortization schedule:

Please note: The Amortization Schedule allows the user to explore the effects of additional principal payments. These changes are not saved and will not impact the Buy vs Rent report.

Cashflow Difference  compares the total funds required for buying or renting over the review period. We calculate this amount by taking the Total Rent Cost (including Annual Rent Increase) - Total Buying Cost (including interest rate and APR) = Estimated Cashflow Difference.

• Total Rent Cost Includes:
  • Monthly Rent (includes annual rent increase %)
  • Monthly Allowance (for Military BAH)
  • Renter's Insurance
• Total Buying Cost includes:
  • Mortgage Payments
  • Property Taxes
  • Homeowners Insurance
  • Maintenance & Repairs
  • HOA fees
  • Down Payment
  • Closing Costs

To make edits to the Total Rent Costs:

1. 1. Select Edit in the top right-hand corner of the page.
   2. Click Edit under Renting.
   3. Make edits to the Monthly Rent amount, Renters Insurance, and Annual Rent Increase. 
   4. Click Save.

To make edits to the Total Buying Costs:

1. 1. Select Edit in the top right-hand corner of the page.
   2. Click Edit under Loan and/or Property sections.
   3. Make your desired edits.
   4. Click Save.

Purchase Closing Cost are the closing costs found under the Loan section. To make edits to the closing costs:

1. Select Edit in the top right-hand corner of the page.
2. Click Edit under Loan.
3. Update inputs for Closing Costs, Credits, Prepaid and Escrows, etc. or use a closing cost worksheet by selecting Use worksheet.
4. Click Save. 

Tax Benefit Over Renting is based on your client's filing status and tax rate. To make edits to this section:

1. Select Edit in the top right-hand corner of the page.
2. Click Edit under Client. 
3. Update the Fed/State Tax Rate and Filing Status: Standard Deduction.
4. Click Save. 

Cost to Sell Est. is determined by calculating a % of the home's future value, which covers the fees for real estate agents. It is defaulted to 6%, but you can edit this under the property section by:

1. Select Edit in the top right-hand corner of the page.
2. Click Edit under Property. 
3. Update the Cost to Sell %. 
4. Click Save. 

Cashflow Difference

Cashflow Difference

• Cashflow Difference compares the total funds required for buying or renting over the review period.
• The interactive chart dynamically compares the monthly expenses of buying a home versus renting over annual intervals. Your selection on the purple slider determines the time frame, automatically refreshing the chart and table to reflect the chosen period.
• A horizontal white line divides the Monthly Rent bars on the graph when the cost to rent exceeds the cost to buy.  Principal is equity and will not be considered a cost for this purpose.