Buy vs Rent in 2026: The Complete Guide to Deciding

The eternal debate, solved by math

"Real estate is always a good investment." How many times have you heard that? The reality is more nuanced. The question is never "buy or rent" in itself, but "buy THIS property at THIS price with THIS rate, or rent and invest the difference?"

To answer objectively, we use the IRR (Internal Rate of Return) — the same tool that investment funds use to evaluate their assets.

Why most calculators mislead you

Most online real estate calculators only compare monthly mortgage payments to rent. This is fundamentally misleading for several reasons:

• They ignore opportunity cost: the down payment and monthly savings could be invested in stocks
• They don't account for closing costs (7-8% in France), which are a net cost
• They underestimate ownership expenses: property tax, maintenance, HOA fees, renovations
• They often overestimate property appreciation using national averages that don't reflect your local market

The real calculation: real estate IRR vs stock market returns

Your property's IRR integrates all financial flows: the initial down payment, every monthly payment, annual charges, the rent you save (or collect), and the net resale value at the end of your holding period.

If your real estate IRR is 7% and the stock market historically returns 8-10% per year (S&P 500 over 30 years), then mathematically, renting and investing the difference in stocks is more profitable.

IRR doesn't say whether real estate is "good" or "bad." It tells you whether it's better or worse than your investment alternative.

The 5 factors that change everything

In 2026, several parameters are decisive:

1. Price-to-rent ratio — The higher it is (Paris > 30), the more favorable renting becomes
2. Mortgage rate — At 3.3% in 2026, leverage is less powerful than at 1%
3. Holding period — Closing costs amortize over time. Below 8 years, buying rarely wins
4. Local market growth — +2%/year in Lyon ≠ +0.5%/year in a rural area
5. Your tax bracket — It impacts capital gains and potential rental income

Concrete example: a €250,000 apartment

Let's take a 2-bedroom in Lyon, France:

• Price: €250,000, closing costs 8%, down payment 10%
• Mortgage: 25 years at 3.3%
• Equivalent rent: €900/month
• Expected appreciation: 2%/year

Our buy vs rent simulator calculates an IRR of 6.8% for this purchase. Against a stock market return of 10%, the "rent + invest" strategy creates €45,000 more wealth over 25 years.

But if appreciation rises to 4%/year (dynamic market), the IRR jumps to 9.2% and buying wins. It's all in the assumptions — which is why you should simulate with your own numbers.

What about NPV?

NPV (Net Present Value) complements IRR by giving you an amount in euros. It represents the gain or loss in today's euros from choosing to buy rather than rent and invest in stocks.

A negative NPV means that even if your final net worth seems higher with real estate, the money would have worked harder in stocks given the time value of money.

See also: SCPI with Leverage: Why It Changes Everything · Real Estate IRR: How to Calculate True Returns