The Rent Versus Buy Debate: A Local Perspective

by UrbanTurf Staff

A DC area brokerage recently put together a rent-versus-buy analysis based on rental and home price information of four Northwest DC zip codes. The comparison of tenant versus home owner analyzed the average rental rate ($1,887 a month) against the average property price in 20008, 20009, 20015 and 20016 ($362,383), and projected out what those payments would be over five years. The chart below compares five-year payments on a 4.42 percent FHA loan, a 2.75 percent 5/1 adjustable rate mortgage and total rental payments over five years.

Click the chart to enlarge

The chart clearly puts forth the idea that with either of the loan options, buying is the better bet to save money and build equity in the long run. While it is important to keep in mind that this is a real estate brokerage putting out this analysis (and that a number of key metrics have been left out), the chart does include disclaimers regarding growth rates and rental projections. Also, conventional financing was not included in the analysis.

However, the big factor here is the growth in value of a home, and despite the fact that the rest of the country’s housing market seems to be down in the doldrums, home prices in the DC area look pretty good these days.

See other articles related to: rent vs buy

This article originally published at http://dc.urbanturf.com/articles/blog/the_rent_versus_buy_debate_a_local_perspective/2423


  1. Simon said at 10:19 am on Thursday August 26, 2010:

    I would like to see this mythical property along Connecticut Avenue that rents for $1900 a month but is listed for $360,000.

  1. Gerald said at 10:23 am on Thursday August 26, 2010:

    Interesting comparison. It should also be pointed out that 30 year-mortgage rates are now at around 4.4%, so going that route would lessen your payments even more.

  1. Gerald said at 10:34 am on Thursday August 26, 2010:
  1. Simon said at 10:34 am on Thursday August 26, 2010:

    I would encourage anyone considering the “rent v. own” question to rely on a credible online calculator rather than what this brokerage put together to assess the specifics of their situation.  For example, http://www.nytimes.com/interactive/business/buy-rent-calculator.html allows one to make more precise assumptions about condo fees, insurance, maintenance, and the like than what is reflected in the chart above.

  1. Simon said at 10:45 am on Thursday August 26, 2010:

    Thanks Gerald.  These two units actually nicely illustrate my point.

    If you plug the listing data from 3616 into the Times’ online calculator, and then compare it to the rental data from 2501, and assume a 2% increase in both home value and rent, then buying only becomes better than renting in year 6. 

    (This assumes, of course, that the units are the same.  In fact, even though its smaller, I suspect that if it were a condo the unit in 2501 Porter would list for more, perhaps much more, than the unit at 3616 Connecticut, and probably carry a higher fee, too, given the amenities in the Porter building.  This would drive the break even point for purchasers even further into the future.)

  1. april said at 11:15 am on Thursday August 26, 2010:

    The Cleveland park unit for sale is 200 square feet bigger than the rental unit. Plus the times calculator is quite suspect. I used to use it and then realized after doing my own calculations that it doesn’t really take into account local market conditions. DC is a different market than than other big metropolitan markets, making the buy case stronger than renting in a number of properties I have compared.

  1. reader said at 11:16 am on Thursday August 26, 2010:

    This comparison is so misleading that I am surprised (and somewhat disappointed) that you decided to post it.  The examples specify downpayments of less than 20% and yet exclude mortgage insurance from their comparison.  This seems to be be for no other reason than to skew the comparison in favor of owning.  Not sure about the ARM, but with FHA you can get a pretty close estimate as it’s a percentage of financed amount.

    Also, as far as I can tell, they don’t include condo fees or saving to cover the cost of repairs and maintenance in a single-family home.  I will grant that these are much harder to estimate than mortgage insurance, but they are not trivial expenses.  To not even mention their existence (or exclusion from the calculation) is definitely a disservice to folks who want to compare which option is better for them.

    It’s unfortunate that this particular broker or brokerage decided to blatantly mislead rather than inform.

  1. on the market said at 11:34 am on Thursday August 26, 2010:

    Thanks reader for the above comment. Let’s not forget that this blog as well as other propaganda is put out by people whose livelihood depends on people purchasing homes.

  1. Janson said at 12:03 pm on Thursday August 26, 2010:

    #reader, right on! Also, no closing costs on the purchase end, and no commissions on the back end. The maintenance is a significant adjustment and NO CONDO or COOP FEE!?

    And the 28% tax bracket (which ostensibly starts at an income of $82,000, but really means $100,000+ after standard deductions) should be explicit. Most middle class effective tax rates are closer to 20%.

    And what about the opportunity cost of the down payment? If you put down $35,000 for the purchase, the renter should get the interest on that same $35,000 credited for the 5 year period.

    This is terrible.

  1. SL said at 1:58 pm on Thursday August 26, 2010:

    For those who don’t choose to buy, the major upside is that you don’t have any home maintenance costs. Especially if you buy an older home (in my case, a 100-yr-old rowhouse) these costs can be significant. Before I bought my first property I had a lot more disposable income. Now I spend that money on repairs to my rental property and improvements to my house. I think it will pay off eventually, but I never realized how expensive it could be to maintain a house.

  1. Simon said at 2:20 pm on Thursday August 26, 2010:


    What have you noticed is inaccurate about the Times calculator?  I’ve compared it to similar calculators and found generally consistent results, so long as the inputs are the same.

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Looking to Give People A Reason to Stay Past 6pm
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Hitting Its Growth Spurt
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »


Profiles of 14 neighborhoods in suburban Maryland

Small-Town Living in the State Capital
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
DC’s Northern Neighborhood on the Cusp
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Getting a Vibrancy of Its Own
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Not To Be Confused With Takoma Park
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

New Development Could Shake Up Pastoral Peace
A Little Bit of Country Just Inside the District’s Borders
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
Evolving from a Brand to a Neighborhood
Ripe for Investment Right About Now
The Difference 5 Years Makes
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾