⚠️ Disclaimer
These are sample scenarios only for illustrative purposes. The numbers are approximate and not tied to specific properties. This is not tax, legal, or financial advice. Please consult with your own advisor before making real-world decisions.
It's not a one-size-fits-all answer. The truth is, the economics look very different depending on the price point. At some levels, buying makes a lot of sense. At others, renting can actually be the smarter move.
To make this real, let's walk through two scenarios.
🔹 Scenario 1: Renting at $10K vs Buying at $2M
Imagine you're paying $10,000/month in rent for a nice 4-bedroom. You're comfortable, but you wonder: "What if I bought a similar home for $2M instead?"
Here's how the numbers shake out:
- Your mortgage on a $1.6M loan at 6% is about $9,600/month.
- Add property taxes, HOA, and insurance, and you're at roughly $12,600/month all in.
- Because this mortgage is under $750k debt for deductibility, a large chunk of the interest is deductible. After tax savings, your cost looks more like $12,200/month.
- But here's the kicker: every month you're also paying down principal. Over 5 years, that's about $150k in equity — roughly $2,500/month that stays in your pocket.
👉 When you net that out, your effective cost is around $9,700/month. That's almost the same as your $10K rent.
So what tips the scale? Appreciation. If the property grows even 3% a year, that's another $300K in value over 5 years. Suddenly, owning doesn't just match renting — it beats it.
This is where ownership feels powerful: you're turning your monthly payments into forced savings + upside potential, instead of sending $10K to your landlord forever.
🔹 Scenario 2: Renting at $30K vs Buying at $7M
Now let's raise the stakes. Say you're renting a luxury condo for $30,000/month, and you're eyeing a $7M home.
Here's the story:
- Your mortgage on a $5.6M loan is about $33,600/month.
- Add taxes, HOA, and maintenance, and you're closer to $44,600/month.
- But here's where the math changes. The IRS only allows you to deduct interest on the first $750k of mortgage debt, no matter how big your loan is. That means the vast majority of your $1.6M in interest isn't deductible. Your tax savings shrink to just about $1,300/month.
- Over 5 years, you'll still pay down about $389K of principal (~$6,500/month in equity).
👉 Netting this out, your effective cost is about $36,800/month — well above your $30K rent.
So what makes buying worth it here? Appreciation. If the property grows just 3% a year, that's about $1.1M in gain over 5 years, which tilts the math back in favor of buying. Without that growth, renting wins hands down.
This is where high-end ownership feels different: you're carrying a lot of monthly cost for the chance at appreciation, but without strong growth, the economics can actually work against you.
💡 The Big Picture
What these examples show is that unit economics shift depending on price tier:
- At $2M, buying already looks competitive with renting, even before factoring in appreciation. Tax deductions still matter at this level, and principal paydown gives you a meaningful boost.
- At $7M, the story flips. Tax benefits stop scaling (thanks to caps), and ownership costs balloon. Renting at $30K can actually be cheaper unless you believe in steady appreciation.
Owning a home isn't just about math — it's about lifestyle, stability, and building wealth over time. But when you run the numbers, you see why some people happily rent luxury properties, while others jump at the chance to buy at the mid-level.
🔑 Takeaway
In San Francisco, the rent vs. buy question doesn't have one answer. It depends on the price point, the tax rules, and your confidence in appreciation.