Planning
Is it better to buy or rent your primary residence?
August 2025
Buying a home is one of the most important financial decisions a person or family can make. For many, it represents stability, a long-term investment, and the satisfaction of having something of your own. For others, renting means flexibility, low commitment, and the peace of mind of not having to face unexpected expenses.
The reality is that neither option is universally “correct.” What matters is having information and tools that enable a conscious decision, evaluating not only the upfront cost but also future expenses, lifestyle, and long-term goals.
A recurring dilemma
Few decisions spark as much conversation as this one: is it better to buy or rent? Buying is often associated with stability and building wealth, while renting is seen as flexibility and less risk.
What may be ideal today might not be in five years. In a context of high prices and mortgage rates in the 7%–8% range, this choice calls for careful analysis.
There’s also an unavoidable personal component: those who value mobility tend to rent; those looking to put down roots tend to buy. In this article we focus on the financial analysis, while keeping in mind that the final decision also depends on your lifestyle.
The 1% rule
One of the best-known “rules of thumb” is the 1% rule. Born among real estate investors, it states that if the monthly rent is at least 1% of the purchase price, the property may be attractive.
Example: a $500,000 house should rent for $5,000/month for buying to make financial sense.
Although it’s a useful guideline, it has limitations: it doesn’t consider tax factors like the mortgage interest deduction or benefits related to a primary residence. In South Florida, this condition is rarely met; rents are usually well below that threshold, which can make renting more advantageous than buying.
An example in numbers
The calculator of the New York Times compares total costs over a period, considering taxes, maintenance, insurance, investment opportunity cost, and equity recovered upon selling.
With assumptions of a price of $1,000,000, rent of $5,000/month, 20% down payment, a 30-year mortgage at 6.75%, and a 10-year horizon, the results are:
This result is explained by the fact that renting frees up capital to invest and reduces recurring expenses like taxes and maintenance, while the tax benefits of buying are limited.
More rigorous methods, such as net present value (NPV) analysis, make it possible to calculate the true cost more precisely. However, for this article we chose the New York Times, which, although simpler, clearly illustrates the differences between the two alternatives.
The timing factor
U.S. home prices have shown an upward trend over the long term, but with occasional drops like the one in 2008. The history of South Florida shows that the entry timing is decisive.
Between 2000 and 2007, prices nearly doubled (+96%).
After the 2008 crisis, they fell sharply and took years to recover.
Anyone who bought in 2006 saw their wealth erode for more than five years.
Those who bought in 2011–2012 enjoyed big gains through 2019 and then the post-pandemic boom, with increases near 90% in some counties.
Buying isn’t always a winning investment: the market cycle matters as much as the asset.
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Practical takeaways
Buying isn’t always the best investment and renting isn’t always “throwing money away.” The financials matter, but so do personal factors: stability for your family or the peace of mind of having a place of your own can justify buying on their own.
The key is to align the decision with your goals, stage of life, and financial reality.
If the decision is to buy, it’s also essential to consider the most advantageous legal and tax structure, especially if the buyer is a foreigner. At Evolution Wealth Advisors, we help our clients do the financial analysis to make their decision. In addition, our clients have access to institutions that offer competitive financing options, beyond the traditional 30-year fixed mortgage.
Footnotes: assumptions and methodology
Key assumptions: price of $1,000,000; initial rent of $5,000/month with 3% annual growth; 10-year horizon; 20% down payment; 30-year mortgage at 6.75%; 3% annual home value growth; 1.35% annual property tax; 1% annual maintenance; 0.55% annual homeowners insurance; extra utilities $300/month; closing costs when buying 4%; closing costs when selling 6%; renters insurance 1% annually of rent; security deposit equal to two months’ rent (returned at the end).
NYT methodology: month-by-month simulation of cash flows in both scenarios, investing at 6% annually the cash difference in favor of renting and returning the security deposit at the end. Mortgage payments are split between interest (expense) and principal paydown (net worth recovered upon sale). All recurring costs grow with the inflation implied by the property value or rent.
Article written by Edmundo Castillo and edited by Michael Marciano and Roberto Vainrub
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