This has been asked a couple of times, but I'm still having trouble with the numbers. I'm a grad student and will be in my area for another 3 years. I'd like to buy instead of rent, but given the crazy high prices and bidding wars because of COVID, don't know if it's a good idea.

The plan would be to put a 20% down on a 1 Br condo (~180K) for 3 years and then leave the area and rent it out to other grad students. Other numbers: rent I'd be paying if I didn't buy (~1000 per month), total monthly cost of condo (~1250 per month), I make around $3083 per month pre-tax.

I tried the NYT Buy-vs-Rent but it doesn't include keeping the property after I buy. How does that change the math? What else should I keep in mind? Is buying in a seller's market a bad idea? How will I know what the max amount I should offer is?

EDIT: I had mentioned $1000 above as the amount I'd be spending if I did not buy. I believe I would be able to rent this property for ~1300-1400 based on comparable other units in this building. The property is also on the nicer end (with stainless steel appliances, granite countertops, hardwood flooring, corner unit etc.) Sorry!

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    Referring to rent as a "donation" seems flippant and biased. Since you are asking the question, you presumably know that renting isn't simply throwing money away.
    – nanoman
    May 17, 2021 at 1:14
  • Apologies, I did think it was a weird way to phrase it. I had just seen it said on a real estate forum and went with it.
    – vsocrates
    May 17, 2021 at 2:28
  • "Given crazy high prices" - this is exactly why renting can be the better option - if house prices have risen beyond comparable rents. Don't fool yourself into thinking there is already an obvious option, or you run the risk of biasing your methodology [ie: the numbers didn't look good to you when you put in a normal 'buy' consideration, so now you are trying to have your cake and eat it too, by saying you will rent it in 3 years]. May 17, 2021 at 13:24
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    IMHO, in order to answer this question (well), we would need to know the details of the $1250/month cost estimate. Can you break it down?
    – TTT
    May 17, 2021 at 14:21
  • What is the condominium/association fee?
    – user662852
    May 17, 2021 at 15:02

2 Answers 2


It doesn't seem like a great idea to buy now, or to buy for an investment property. With a 1K rent vs 1250 condo cost with 20% down, I am almost certainly renting even if I was not in grad school. Just to break even, you will have to make 9K plus the costs to transact real estate (not cheap), plus the opportunity cost on 36K over 3 years. That is a lot of money. This is a no brainer rent situation IMHO. More so that you are in grad school and should be concentrating on how that will lead to a life time increase in earnings.

Do you have experience being a landlord? Do you really want to be a long distance landlord? Are you okay with a negative cash flow property?

Once you are done with school the decision to either sell the property or become a landlord stands on its own. Would you rather have x dollars (proceeds from the sale) or open/add to your landlord business?

For most people the best business decision is to sell. Their full time career will make being a long distance landlord very expensive to the point of it being a very unwise decision. While that is not true in all cases, it is for most.

You can always use the money to buy a property, in your home town, and use that to start a landlord business after you are done with school.

Response to Edit:

To me, the Edit does not change much. The numbers make a bit more sense to buy, but the principles of having a long distance rental does not. Just rent for three years, and if you desire start a landlord business local to where you intend on living.

  • 1
    "Just to break even, you will have to make 9K..." -- shouldn't this also account for the equity buildup?
    – nanoman
    May 17, 2021 at 15:47
  • @nanoman Good point, and it is a lot more than I would have expected. About 9k on a 30 year mortgage.
    – Pete B.
    May 17, 2021 at 16:44
  • Appreciate the feedback! I got the 9K but where did the value of 36K come from for the opportunity cost? To answer the other question, I don't have experience being a landlord but have talked to some prop management companies on what they'd charge. I think I could get ~1300-1400 for rent, so factoring in prop management, I don't think I'd have negative cash flow unless I'm wrong on the definition. Completely agree on the issues with being a long distance land lord though, I wouldn't want to do that!
    – vsocrates
    May 17, 2021 at 17:17
  • @vsocrates - In your question, you list comparable rent as 1000. Why do you think you could get 1300-1400 if comparable rent is only 1000? May 17, 2021 at 17:19
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    @vsocrates - OK, then that's not "comparable rent". I see you edited that out of the question but several people have answered the question assuming that you meant by "comparable rent" that you could rent a comparable unit for $1000 and included that in their answer. If the actual unit you're purchasing would likely actually rent for $1400, that is important information that should be edited into your question. May 17, 2021 at 17:39

The 3 years you would live there are potentially minor compared to the total ownership time, so this is mainly an investment property decision. The wrinkle is that you are considering an investment property before having a stable home of your own.

Are you confident that you will be able to afford, and qualify for, your own housing after you move? Note that your continuing mortgage payments on the condo will be counted as debt service, while your rental income (especially since it will be, at best, just starting) may not be counted as fully as a more stable source of income. So you may well look (or even be) cash-flow poor at that time, unless you get a salary boost upon graduation. And even then, there may be delicate timing among starting your new job, moving, and leasing the condo -- you will have to convince others (not just yourself) that you are solvent throughout this process.

As an investment, based on the numbers you state, the condo yields 6.7% per year ($12k/$180k), which meets the 5% rule and suggests buying.

  • Sorry, I'm very unfamiliar with real estate finances. I am working under the assumption that I will get a significant salary boost (at least 2.5X), given my field of study. However, would there be a situation where I would not be able to get a loan for another property that I plan to move into because I am still renting this out and paying off the mortgage?
    – vsocrates
    May 17, 2021 at 2:38
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    @vsocrates If your income will go up enough that you can easily cover both the condo and another home, then no problem. But you should have a backup plan in case home prices are higher than expected or your income is lower than expected when you want to buy your next home. (E.g., the backup plan could be selling the condo.) You may want to talk with a realtor or mortgage broker in both your current area and the area you want to move to, for a sense of how it works to buy a second property while keeping the first, including details like a property manager (since you'll be a non-local landlord).
    – nanoman
    May 17, 2021 at 7:33
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    The 5% rule link refers to freestanding homeownership and assumes a maintenance cost of 1%. It's possible the condo association fee is less than $1800 per year (and I've asked a clarifying question what the condo association fee is) but my guess is it'll be higher already.
    – user662852
    May 17, 2021 at 15:05

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