Renting vs. Buying in Northern California: A 10-Year Cost Breakdown That Might Surprise You

The Cost Comparison You Need to See

Renting vs. Buying: A Financial Breakdown Over 10 Years

We recently came across a compelling video that explored the financial advantages of renting over buying a home. It made some excellent points, particularly in today's market where homeownership has become significantly more expensive. Inspired by this, we wanted to analyze a real-world example here in Northern California to see how the numbers play out over time.


To do this, we’re comparing two scenarios: purchasing versus renting the same home. The property in question is 3870 Westridge Rd, Cottonwood, CA 96022, a 3-bed, 3-bath home with 2,167 sq. ft., previously rented for $2,095/month, and currently listed for $565,000.


We’ll break down both paths over a 10-year period to determine which makes more financial sense.


Scenario 1: Buying the Home


Assumptions for Buying:


  • Home Price: $565,000
  • Down Payment: 3% = $16,950
  • Loan Amount: $548,050
  • Mortgage Rate: 6.7% fixed
  • Loan Term: 30 years
  • Monthly Principal & Interest: $3,546
  • Property Taxes: 1.1% per year = $6,215 annually ($518/month)
  • Home Insurance: $3,000 annually ($250/month)

Maintenance & Repairs: Estimated at 1.5% of home value annually = $8,475 per year ($706/month)



Total Monthly Costs of Ownership:

Expense Type Monthly Cost
Mortgage Payment $3,546
Property Taxes $518
Home Insurance $250
Maintenance & Repairs $706
Total Monthly Cost $5,020

Total 10-Year Costs of Ownership:

Expense Type 10-Year Cost
Mortgage Payments $425,520
Property Taxes $62,150
Home Insurance $30,000
Maintenance & Repairs $84,750
Total Costs $602,420


Scenario 2: Renting the Home


Assumptions for Renting:


  • Rent Price: $2,095/month (remains constant for simplicity)
  • Renter’s Insurance: $250/year ($20/month)
  • No Maintenance or Property Tax Responsibilities


Total Monthly Costs of Renting:

Expense Type Monthly Cost
Rent $2,095
Renter’s Insurance $20
Total Monthly Cost $2,115

Total 10-Year Costs of Renting:

Expense Type 10-Year Cost
Rent $251,400
Renter’s Insurance $2,500
Total Costs $253,900

Key Takeaways: Renting vs. Buying Over 10 Years

Metric Buying the Home Renting the Home
Upfront Cost $16,950 (down payment) $0
Monthly Cost $5,020 $2,115
10-Year Total Cost $602,420 $253,900
Equity Built ~$180,000 (loan principal paid) $0
  • Renting is more affordable in the short term. Over 10 years, renting would cost about $348,520 less than buying when accounting for all ownership expenses.
  • Buying may make sense long-term if the home appreciates. While ownership is significantly more expensive, some of this cost is offset by equity. After 10 years, an estimated $180,000 in mortgage payments would go toward reducing loan principal. However, it’s important to consider how long homeowners typically stay in their homes. Before COVID-19, the average homeowner held onto their property for about 8 years. Post-pandemic, that number has increased to around 12 years. If you're unsure about staying in one place for at least a decade, renting may be the more practical financial decision.
  • Unexpected costs of homeownership. Taxes, insurance, and maintenance add significantly to the cost of owning, often making it far pricier than first-time buyers expect. These ongoing expenses can sometimes offset the benefits of building equity, especially if a homeowner decides to sell before truly reaping the long-term financial benefits.



Investment Growth of Renting Savings Over 10 Years


Key Assumptions:


  • Annual Savings from Renting vs. Owning: $348,520 total over 10 years = $34,852 per year
  • Investment Growth Rate: 7% per year (compounded annually)
  • Investment Duration: 10 years
  • Contributions: Investing the annual savings instead of putting that money into homeownership costs


Investment Growth Over Time:

Year Annual Contribution Interest Earned Total Investment Value
1 $34,852 $2,440 $37,292
2 $34,852 $5,187 $77,331
3 $34,852 $8,213 $120,396
4 $34,852 $11,537 $166,785
5 $34,852 $15,179 $216,886
6 $34,852 $19,162 $271,100
7 $34,852 $23,510 $329,792
8 $34,852 $28,251 $393,344
9 $34,852 $33,415 $462,116
10 $34,852 $39,037 $536,504

Renting + Investing vs. Buying a Home


  1. Investing rental savings over 10 years could result in over $536,000 in a retirement fund—a significant financial advantage.
  2. Comparatively, homeownership builds approximately $180,000 in equity over the same period. While home values may appreciate, market fluctuations could affect returns.
  3. Liquidity & Flexibility: Renting + investing provides easier access to cash compared to homeownership, where wealth is tied to property value and requires selling or refinancing to access equity.


Wrap Up: Renting Can Be a Smart Wealth-Building Strategy

For those prioritizing financial flexibility, renting isn’t just about lower monthly costs—it’s also an opportunity to invest in high-growth assets. If homeownership isn’t an immediate priority, allocating extra savings to a retirement account or diversified investment portfolio can lead to substantial long-term wealth accumulation.


At Authority Property Management, we help renters find high-quality homes in the Redding and Cottonwood area, so they can enjoy financial flexibility while securing a comfortable place to live. Contact us today to explore available rental options!


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Disclaimer: The content on this blog is for informational purposes only and is not intended as legal or advice. Consult with a qualified professional for specific advice.

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