Rent vs. Buy at $1M: How to Actually Run the Numbers

This is the question smart buyers wrestle with the most — and the one that gets the most oversimplified answers. “Buying always wins long-term.” “Renting gives you flexibility.” Both are true in the right context. Neither helps you make a decision.

Here’s a framework that does.

The Variables That Actually Matter

The rent vs. buy question isn’t really about renting versus buying. It’s about the cost of owning versus the opportunity cost of your down payment and the flexibility premium of not owning. Let’s break each one down.

The True Cost of Owning

On a $1.1M home with 20% down ($220,000), your mortgage is roughly $880,000. At a 7% rate on a 30-year fixed, your principal and interest payment is approximately $5,855/month. Add property taxes in King County (roughly 0.9–1% of value), homeowner’s insurance, and any HOA fees, and your all-in monthly cost is likely $7,500–$8,500.

Compare that to what you’re paying in rent. If you’re renting a comparable home for $5,500/month, the gap looks significant. But this is where most people stop — and that’s the mistake.

What You’re Building With Each Payment

The mortgage payment isn’t all expense. A portion of every payment goes to principal paydown — equity you actually own. In year one on an $880K loan at 7%, roughly $600–$700/month goes to principal. That number grows every year as the loan amortizes.

You’re also building equity through appreciation. King County home values have historically appreciated at 4–6% annually over long periods — though past performance doesn’t guarantee future results, and values can and do decline in the short term.

The Opportunity Cost of Your Down Payment

Here’s what often gets left out of the rent vs. buy conversation: if you put $220,000 into a down payment, that money is no longer invested. If it would otherwise be generating 7–8% annually in a diversified portfolio, you’re giving up roughly $15,000–$17,000 per year in potential returns. That’s a real cost. It needs to be in the model.

The Flexibility Premium

Buying a home is a five-to-seven year commitment at minimum, if you want to avoid transaction costs eroding your equity. The 5–6% cost of selling (agent commissions, transfer taxes, closing costs) means you need meaningful appreciation just to break even on a short hold.

If there’s a reasonable chance you relocate, change jobs, or want optionality in the next three years — that needs to be weighted honestly.

The math often favors buying if you’re staying 5+ years, your rent is rising, and you’re in a high-appreciation market. It’s not a given — it’s a calculation.

The Part Nobody Talks About

Buying forces a savings behavior that most people benefit from. Your equity builds every month whether you think about it or not. For high earners who are good at making money but not always disciplined about deploying it into long-term assets, a mortgage can be the most effective wealth-building tool in their portfolio — not because of leverage, but because of consistency.

Want to run the actual numbers for your situation? I’ll build the comparison with real rates and real property tax data.