{
  "@context": "https://schema.org",
  "@type": "Dataset",
  "name": "What is the 5% rule for renting vs buying?",
  "description": "Multiply the home price by 5% and divide by 12; if comparable rent is below that, renting is likely the better deal. For a $420,000 home: $420,000 × 5% ÷ 12 = $1,750. Rent of $2,200 is above it, so buying is competitive if you stay long enough.",
  "url": "https://www.revenuelab.fyi/answers/what-is-the-5-percent-rule-rent-vs-buy",
  "dateModified": "2026-10-01",
  "creator": {
    "@type": "Organization",
    "name": "RevenueLab",
    "url": "https://www.revenuelab.fyi"
  },
  "license": "https://creativecommons.org/licenses/by/4.0/",
  "keywords": [
    "Rent vs Buy Net Worth Calculator",
    "Price-to-Rent Ratio Calculator"
  ],
  "distribution": {
    "@type": "DataDownload",
    "contentUrl": "https://www.revenuelab.fyi/api/public/page.json?path=answers%2Fwhat-is-the-5-percent-rule-rent-vs-buy",
    "encodingFormat": "application/json"
  },
  "json": {
    "type": "answer",
    "question": "What is the 5% rule for renting vs buying?",
    "shortAnswer": "Multiply the home price by 5% and divide by 12; if comparable rent is below that, renting is likely the better deal. For a $420,000 home: $420,000 × 5% ÷ 12 = $1,750. Rent of $2,200 is above it, so buying is competitive if you stay long enough.",
    "tableTitle": "Where the 5% comes from",
    "columns": [
      "Component",
      "Share of value/yr",
      "What it represents"
    ],
    "rows": [
      {
        "label": "Property tax",
        "value": "≈1%",
        "note": "Varies 0.3%–2.2% by state"
      },
      {
        "label": "Maintenance",
        "value": "≈1%",
        "note": "Repairs, replacements"
      },
      {
        "label": "Cost of capital",
        "value": "≈3%",
        "note": "Blend of mortgage interest and forgone equity return"
      },
      {
        "label": "Total",
        "value": "≈5%",
        "note": "Annual unrecoverable cost of owning"
      }
    ],
    "context": "The 5% rule is a quick screen, not a full model — at 6.5% mortgage rates the cost-of-capital component is closer to 4%, making the threshold nearer 6%. The net-worth calculator replaces the rule with explicit inputs.",
    "methodology": "Threshold rent = price × 5% ÷ 12. Rule popularised by PWL Capital's Ben Felix (2021). Higher-rate adjustment is our estimate using the 6.5% default rate.",
    "dateModified": "2026-10-01",
    "relatedCalculators": [
      {
        "label": "Rent vs Buy Net Worth Calculator",
        "to": "/rent-vs-buy-net-worth-calculator"
      },
      {
        "label": "Price-to-Rent Ratio Calculator",
        "to": "/price-to-rent-ratio-calculator"
      }
    ],
    "relatedReading": [
      {
        "label": "Is renting throwing money away?",
        "to": "/answers/is-renting-throwing-money-away"
      }
    ]
  }
}