The comparison most people make is the wrong one
The instinctive test is to put the monthly rent next to the monthly mortgage payment and pick the smaller number. That comparison is broken in both directions. Part of a mortgage payment is capital repayment, which is not a cost but a transfer into your own equity. Meanwhile owning carries costs a tenant never sees, and buying and selling both cost money that is gone for good.
The comparison that works is between unrecoverable costs. Rent is entirely unrecoverable. Some of the cost of owning is unrecoverable too, and it is only that portion that belongs on the other side of the scale.
What counts as unrecoverable when you own
- Mortgage interest. Paid to the lender, never returned. Capital repayment is excluded.
- Opportunity cost on your own capital. The deposit and the purchase costs are money that could have earned a return elsewhere. Leaving this out makes owning look better than it is. Whatever rate you assume here is an assumption and should be labelled as one.
- Recurring property tax. An annual charge to the state that produces nothing you can sell.
- Service charges and building fees. Paid by owners, not tenants.
- Buildings insurance. An owner cost, distinct from a tenant’s contents policy.
- Maintenance and replacement. Expressed as an annual allowance rather than pretended away.
- Round-trip transaction costs. Acquisition costs at the start and selling costs at the end. These are the single largest reason short ownership periods are expensive.
Capital appreciation is deliberately absent. Nobody forecasts it reliably, and treating an assumed increase as a cost offset turns analysis into prediction. Compute the break-even without it, then test separately how sensitive the answer is.
The formula
Annual unrecoverable cost of owning = mortgage interest + opportunity cost on capital + property tax + service charge + insurance + maintenance allowance
Break-even holding period in years = round-trip transaction costs / (annual rent minus annual unrecoverable cost of owning)
The second formula only has meaning when annual rent exceeds the annual unrecoverable cost of owning. If it does not, there is no break-even from these inputs alone.
Worked example
Every figure below is invented for the purpose of showing the arithmetic. None describes a real market and the rates chosen are illustrative only.
Suppose the purchase price is 250,000 in local currency. Suppose acquisition costs are 8 percent, so 20,000, and expected selling costs are 4 percent of price, so 10,000. Round-trip transaction cost is 30,000.
Suppose you put in 100,000 of your own money and borrow 150,000 at 4 percent, giving first-year interest of about 6,000. Suppose the alternative return on capital you are assuming is 3 percent, applied to the 100,000 deposit plus the 20,000 of purchase costs, so 120,000 x 0.03 = 3,600. Suppose recurring property tax is 800, service charge is 1,400, insurance is 300, and a maintenance allowance of 0.8 percent of price is 2,000.
Annual unrecoverable cost of owning = 6,000 + 3,600 + 800 + 1,400 + 300 + 2,000 = 14,100.
Suppose the comparable property rents for 1,300 a month, so 15,600 a year. The annual advantage from owning is 15,600 minus 14,100 = 1,500.
Break-even = 30,000 / 1,500 = 20 years.
Now change one input. Suppose comparable rent is 1,500 a month, so 18,000 a year. The annual advantage becomes 3,900 and the break-even falls to 30,000 / 3,900 = 7.7 years. A 15 percent change in rent moved the break-even by more than a decade. That extreme sensitivity is the real finding, and it is why a break-even figure should always be presented as a range across plausible inputs rather than as a single number.
| Cost line | Renting | Owning | Recoverable when you leave? |
|---|---|---|---|
| Rent | Full amount | None | No |
| Mortgage interest | None | Yes | No |
| Capital repayment | None | Yes | Yes, it becomes equity |
| Opportunity cost on capital | Only on a small deposit | On deposit plus purchase costs | No |
| Recurring property tax | Sometimes charged to tenants, varies | Yes | No |
| Service charge | Usually not | Yes | No |
| Buildings insurance | No | Yes | No |
| Maintenance | Landlord’s cost | Yes | Partly, if it preserves value |
| Acquisition costs | Deposit and agency fee, small | Yes, and large | No |
| Selling costs | None | Yes | No |
The cross-border factors that change the answer
- Expected time in the country. The break-even is a holding period. If your plans have a shorter horizon, the arithmetic answers itself.
- Selling time, not just selling cost. In slower markets a sale can take many months, during which you may be paying for two homes.
- Currency. If you earn in another currency, both rent and ownership costs move against your income, but a mortgage locks a long obligation in a currency you do not earn.
- Tax treatment. Whether mortgage interest, property tax or maintenance receives relief, and whether a gain on sale is taxable, differ by country and by residence status.
- Tenant and landlord law. Security of tenure, notice periods and rules on rent increases determine how stable the renting side of the comparison actually is.
- Ownership restrictions and mortgage availability. If a larger deposit is required of non-residents, the opportunity cost line grows and the break-even moves out.
How to run it honestly
Write down every assumption with its source. Purchase costs come from a lawyer’s draft completion statement, service charges from the building accounts, property tax from the tax authority’s assessment basis, rent from actual comparable listings. Then run the calculation three times, with pessimistic, central and optimistic inputs. We find the width of the resulting range is usually more informative than any single answer inside it.
This is a method for structuring a decision, not advice on what to do, and it deliberately says nothing about whether property is a good investment. Costs, taxes and tenancy rules vary by country and change over time, and we would confirm the local inputs with a qualified local tax adviser, lawyer or accountant before treating any of the output as a basis for a commitment.
How to Use This Guide
Every worked example on this page is illustrative. The figures are chosen to show how the calculation behaves, not to report current market rates. Costs, tax rules and eligibility criteria differ by country and change over time, so take the method from this page and put your own current figures into it. Browse the rest of our guides, or see how we source and check our comparison figures on the about page.
Information only. This article explains how costs and rules are structured. It is not financial, tax, legal or immigration advice, and it is not a recommendation to buy any property, vehicle or investment. Confirm anything that affects a decision with the relevant local authority or a qualified professional before you act on it.
Last updated: August 14, 2026