About Real Estate Armageddon

Welcome to Real Estate Armageddon, your partner in making one of life's biggest financial decisions: Should you rent or buy a home? Our mission is to provide the fairest, most unbiased comparison possible, empowering you with data, not dogma.

The Challenge: Navigating Financial Advice

You've probably heard it before, perhaps from well-meaning finance influencers or traditional advisors: "Renting is just throwing money away!" or, conversely, "Rent and invest the difference; you'll be much better off!" The truth is, the optimal choice is deeply personal and depends on a multitude of financial and lifestyle factors. Generic advice rarely fits individual circumstances.

A common argument for renting is the ability to invest the substantial sum that would otherwise go towards a down payment, closing costs, and higher monthly homeownership expenses. This calculator is designed to rigorously test that very premise.

Our Rationale: Equalizing for a Fair Comparison

To create a truly unbiased comparison, we operate on a principle of equalized monthly cash outflow. Here's how it works:

  • We calculate the total monthly cost for buying (mortgage, taxes, insurance, maintenance, etc.) and for renting (rent, renter's insurance).
  • Whichever option is cheaper on a monthly basis, the difference is assumed to be invested by that party.
  • For example, if buying costs $2500/month and renting costs $2000/month, the renter is assumed to invest the $500 difference each month. Conversely, if buying were cheaper, the buyer would invest the difference.
  • The down payment for buying is also considered an initial investment for the renter, if the renter forgoes buying.

This approach ensures that both scenarios (renting and buying) involve the same overall financial commitment each month, with surplus funds actively working to build wealth through investments. The "Net Project Balance" you see in the results reflects the total financial position, including property equity for the buyer and the investment portfolio for both parties.

Key Calculations Explained

Our calculator employs standard financial formulas to project your outcomes. Here are some of the core calculations:

1. Monthly Mortgage Payment (Principal & Interest)

Calculated using the standard annuity formula:

\\[ M = P \\frac{r(1+r)^n}{(1+r)^n - 1} \\]

Where:

  • M = Monthly mortgage payment
  • P = Principal loan amount (Property Price - Down Payment)
  • r = Monthly interest rate (Annual Mortgage Rate / 12)
  • n = Total number of payments (Mortgage Term in years * 12)

2. Future Value of Monthly Investments

When one option has lower monthly costs, the difference is invested. We calculate the future value of these regular, monthly investments using the formula for the future value of an ordinary annuity:

\\[ FV = Pmt \\times \\frac{((1 + i)^{t} - 1)}{i} \\]

Where:

  • FV = Future Value of the series of investments
  • Pmt = Monthly investment amount (the saved difference)
  • i = Monthly investment return rate (Annual Investment Return / 12)
  • t = Total number of months the investment is made

The initial down payment (if the renter invests it) grows as a lump sum: FVlump = PV (1 + i)t.

3. Net Project Balance

This is the ultimate measure of your financial position over time for each scenario. It's calculated as:

For Buying:

\\[ \\text{Net Balance}_{Buyer} = (\\text{Current Property Value} - \\text{Remaining Mortgage Balance}) + \\text{Financial Investment Value} - \\text{Cumulative Non-Recoverable Costs} \\]

For Renting:

\\[ \\text{Net Balance}_{Renter} = \\text{Financial Investment Value} - \\text{Cumulative Renting Costs} \\]

The calculator meticulously tracks appreciation, inflation, and all specified costs month by month to arrive at these balances.

Our Commitment

Real Estate Armageddon is committed to transparency and analytical rigor. We believe that by understanding the mechanics of the comparison and seeing a projection based on your unique inputs, you can make a more informed and confident decision. No hype, just numbers and a clear framework for comparison.