Down Payment Invested vs Tied Up in Home
A **down payment in a home** builds equity but is illiquid. **Investing that lump sum** while renting can outpace appreciation if markets cooperate—but you still pay rent with no forced savings.
Step by step
1. Set opportunity cost %
Use expected portfolio return on the down payment foregone.
2. Model rent growth
Rent hikes erode the invest-and-rent strategy over 7-10 years.
3. Add closing and selling
Buying has friction costs on both ends of ownership.
Invested down payment vs home
Breakeven depends on rent, appreciation, and after-tax invest returns.
- Invest while renting: Liquid; market risk; no maintenance or property tax.
- Buy with down payment: Leveraged housing exposure; forced savings; illiquid.
Use our calculators
Common mistakes
- Ignoring rent inflation
- Assuming home prices always beat stocks
FAQ
Should opportunity cost be stock returns?
Use a conservative after-tax return you would actually hold.