Should I invest my down payment instead of buying a house?
Only if you'll actually invest it and expect to move within the break-even period. $42,000 down plus $12,600 closing costs invested at 6% grows to about $82,100 in 7 years; the same purchase builds roughly $160,500 of post-sale equity at 3.5% appreciation — but owning also costs ~$1,080/mo more than rent, which the renter can invest.
Down payment invested vs home equity after 7 years
| Path | Value at year 7 | Notes |
|---|---|---|
| Invest $54,600 at 6% | ≈$82,100 | Closing costs count too — they're spent at purchase |
| Home equity after 6% selling cost | ≈$160,500 | ≈$534,400 value × 0.94 − ≈$341,800 loan balance |
| Full net worth incl. monthly gap | Rent ≈$179,900 vs buy ≈$160,500 | Renting leads at year 7; buying overtakes in year 11 |
How to read this table
- Home equity after 6% selling cost sits at the top of the table (≈$160,500) — ≈$534,400 value × 0.94 − ≈$341,800 loan balance. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
- Invest $54,600 at 6% anchors the bottom (≈$82,100) — closing costs count too — they're spent at purchase. Treat this as the conservative case you should still be profitable at.
- The gap between the top and bottom row is roughly 2.0×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
Context
This isolates up-front cash only. Owning usually costs more per month early on; if the renter invests that monthly gap too, the result can flip. Use the net-worth calculator for the complete comparison.
What moves this number
Financing terms
Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.
True operating expense ratio
Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.
Vacancy and turnover
One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.
Local regulation
Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.
Methodology
Assumptions (all editable in the calculators): $420,000 home (≈2025 US median, NAR), 10% down, 6.5% 30-year fixed (Freddie Mac PMMS range), 3.5%/yr appreciation and rent growth (long-run FHFA HPI / CPI shelter), 1.1% property tax, 1% maintenance, $1,900/yr insurance, 3% buy and 6% sell costs, 6%/yr investment return. Excludes mortgage interest deduction, capital-gains tax and PMI.
Assumptions and caveats
- Returns exclude appreciation and principal paydown unless a row states otherwise.
- Local tax, insurance and regulation can move these figures by several points in either direction.
- This page was last reviewed on 2026-10-01. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
Should I invest my down payment instead of buying a house?
Only if you'll actually invest it and expect to move within the break-even period. $42,000 down plus $12,600 closing costs invested at 6% grows to about $82,100 in 7 years; the same purchase builds roughly $160,500 of post-sale equity at 3.5% appreciation — but owning also costs ~$1,080/mo more than rent, which the renter can invest.
Which option pays the most in the down payment invested vs home equity after 7 years table?
Home equity after 6% selling cost, at ≈$160,500 (≈$534,400 value × 0.94 − ≈$341,800 loan balance). That row represents the strongest case in this dataset, so use it as an upper bound rather than an expectation.
What is a realistic low-end figure?
Invest $54,600 at 6% at ≈$82,100 (Closing costs count too — they're spent at purchase). Plan your costs so the low end still works, then treat anything above it as upside.
Why do the numbers vary so much?
The spread between the highest and lowest row is about 2.0×. Financing terms and true operating expense ratio explain most of that gap — see the drivers section above for the full list.
Where do these numbers come from?
Assumptions (all editable in the calculators): $420,000 home (≈2025 US median, NAR), 10% down, 6.5% 30-year fixed (Freddie Mac PMMS range), 3.5%/yr appreciation and rent growth (long-run FHFA HPI / CPI shelter), 1.1% property tax, 1% maintenance, $1,900/yr insurance, 3% buy and 6% sell costs, 6%/yr investment return. Excludes mortgage interest deduction, capital-gains tax and PMI.
How can I estimate my own number instead of using a benchmark?
Use the Down Payment Opportunity Cost Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
Related reading
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Last updated 2026-10-01.