Buy-or-rent calculator

The calculation behind buying vs. renting:

Step 1: calculate the price-to-rent ratio:

Purchase price ÷ annual rent (basic) = ratio.
• Under 20: buying is probably worthwhile
• 20–25: grey area, calculate more precisely
• Over 25: renting is probably cheaper

Munich example: €500,000 purchase price ÷ €18,000 annual rent = ratio 27.8. Renting is cheaper here.

Rural example: €250,000 purchase price ÷ €12,000 annual rent = ratio 20.8. Buying is more likely to pay off.

Step 2: calculate the opportunity cost:

Instead of putting your equity (e.g. €80,000) into the property, you could invest it in an ETF. At a 7% return, €80,000 becomes €310,000 in 20 years. The property has to beat this "missed return".

When buying is clearly better:

✅ You'll stay in the same place for 15+ years
✅ The ratio is below 20
✅ You have 20%+ equity
✅ The loan instalment isn't higher than your current rent including heating