For most Los Angeles buyers, the break-even point between renting and buying is 5-7 years. Below that, transaction costs and the opportunity cost of investing your liquid assets in the market instead make renting cheaper. Above that, equity build and rent inflation make buying the better long-term move. The honest math depends on your specific situation: how much liquid you actually have, the home price, rate, PMI if you put down less than 20 percent, your rent today, and what you would have earned investing what's left in the market.
Defaults reflect typical Los Angeles numbers. Adjust to match your scenario.
Adjust the inputs to see how your scenario plays out.
Cumulative net cost of each path over the years. The point where the lines cross is your personal break-even.
Most calculators online compare your mortgage payment to your rent and call it a day. That math is almost always wrong, and it usually nudges people toward buying when renting would have been the smarter financial move.
The honest comparison has to include six things most calculators get wrong:
This is the one most calculators botch. The right way to model opportunity cost is not "if you didn't put down $90,000, you would have invested $90,000." It's: here is your actual pot of liquid assets. If you buy, you spend down + closing out of it; the leftover stays invested. If you rent, all of it stays invested. That difference, compounded at the S&P 500 long-term average of about 10 percent annually (Trade That Swing analysis based on NYU Stern data, March 2026), is the real opportunity cost. The calculator on this page uses that approach.
Conventional loans with less than 20% down require private mortgage insurance. Typical PMI rates run 0.2 to 1.5 percent of the loan amount annually depending on credit score and loan-to-value. The calculator defaults to 0.25 percent (lower end of the typical range; your actual rate may be higher). PMI drops off automatically when the loan reaches 78 percent loan-to-value on conventional loans — usually around year 4-7 depending on your down payment and appreciation rate.
Under Proposition 13 (passed 1978), California property tax can increase by a maximum of 2 percent per year, or the rate of inflation, whichever is lower (CA Board of Equalization). It has been less than the 2 percent cap only 5 times since 1977. Calculators that hold property tax flat understate your true cost of owning. This calculator models the full 2 percent compounding.
Buying typically costs around 2-3% in closing costs. Selling typically costs around 6% (agent commission + transfer tax + miscellaneous). On a $900,000 home that holds value, that's around $81,000 in friction you have to overcome before you've made any money. Short holding periods can't recover this.
Rent in LA has historically inflated 3-5% per year. Over 7 years, a $3,800 rent compounds to roughly $4,800. Yes, your mortgage payment is more stable, but renters are not paying the same amount forever like the naive math suggests.
Since 2017, the standard deduction is $29,200 (married filing jointly, 2026). For the mortgage interest and property tax deduction to actually save you money, your itemized deductions have to exceed the standard deduction. On most LA condos and lower-priced homes, they don't. The calculator accounts for this with the marginal tax rate input — if you're not itemizing, set it to 0.
When you put all of this together honestly, the answer is rarely "buying is always better" or "renting is always better." It's: given your actual liquid assets, this is the break-even year, and this is the dollar amount the winning choice saves you.
The single biggest variable is how long you stay. If you're going to be in LA for 3 years, renting almost always wins. If you're going to be there for 10+, buying almost always wins. The interesting case is the 5-7 year range, where the answer depends on the specifics — and that's where this calculator earns its keep.
Is buying or renting better in Los Angeles in 2026?
It depends on how long you plan to stay. For holding periods under 3-4 years, renting is typically cheaper in LA because of high transaction costs. For 5+ year holds, buying usually wins due to LA's strong long-term appreciation. The calculator on this page shows your exact break-even year based on your specific numbers.
What is the break-even point for buying vs renting?
The break-even point is the year when the total cost of owning (net of equity built) drops below the total cost of renting (net of investment returns on down payment). In Los Angeles, this is typically 5-7 years for most scenarios, but varies based on home price, rate, and rent.
Should I rent if rates are high?
Not necessarily. High rates compress affordability, but they also typically compress home prices over time. Buying at high rates and refinancing later when rates drop can be a winning strategy if you plan to hold the home long term. The key variable remains how long you stay, not the rate at purchase.
Does the buy vs rent calculation include tax benefits?
Yes, but only if you itemize deductions. The mortgage interest deduction and property tax deduction only matter if your itemized deductions exceed the standard deduction. With the higher standard deduction since 2017, many LA buyers do not itemize even on expensive homes. The calculator accounts for this with a marginal tax rate input.
What appreciation rate should I assume for LA?
Los Angeles has averaged 5-7% annual home appreciation over the past 30 years, but with high volatility year to year. A moderate assumption is 3-5% annually. The calculator defaults to 4%, in line with 2026 LA-area forecasts. Be cautious of using historical highs to justify a buy decision; markets do not always cooperate.
Why does PMI appear in the math?
If you put less than 20% down on a conventional loan, you pay private mortgage insurance (PMI) until your loan-to-value ratio reaches 78% (around 22% equity). The calculator defaults to 10% down, so PMI is included by default. Actual PMI rates vary from about 0.2% to 1.5% of the loan amount annually depending on credit and loan-to-value. The calculator assumes 0.25%, which is the low end of typical ranges. Your actual PMI may be higher; verify with a lender.
What S&P 500 return should I assume?
The S&P 500 has averaged about 10% annually over its long history. The 30-year average through early 2026 was 10.12%; the lifetime average since 1957 is about 10.3%. Adjusted for inflation, the long-term real return is closer to 7%. The calculator defaults to 10% nominal. If you want a more conservative estimate, use 7-8%.
Does the calculator account for California's Proposition 13 property tax cap?
Yes. Under Prop 13, California property tax assessments can increase by a maximum of 2% per year (or the rate of inflation, whichever is lower). The calculator models the 2% annual escalation in property tax over your holding period. Note that property tax resets to current market value on resale, so the next buyer pays significantly more — a key California-specific dynamic.
This calculator is for educational purposes only and is not a substitute for personalized financial or tax advice. Default assumptions: 4% annual home appreciation (LA 2026 forecasts), 2% annual property tax escalation (Prop 13 maximum), 10% annual investment return (S&P 500 long-term historical average), 0.25% PMI rate when down payment is below 20%, 3% closing costs at purchase, 6% selling costs. Actual outcomes depend on market conditions, your specific situation, tax filing status, and other factors not captured here. Historical averages do not guarantee future results. Consult a qualified financial advisor and tax professional before making major housing decisions. Daryn Fillis NMLS #1988371. Branch NMLS #2733710. 222 Pacific Coast Hwy, 10th Floor, Suite 135, El Segundo, CA 90245. NEO Home Loans powered by Better Mortgage Corporation. Equal Housing Opportunity.