Should I Buy My Landlord's House for Just $30 More a Month?

Understanding the Decision to Buy a Home

Imagine this scenario: Beth, who is 36 years old, has spent her adult life renting. For the past two years, she has been living in a three-bedroom rental that she considers could be her “forever” home. It’s located in a neighborhood she loves, and recently, her landlord offered to sell her the house. She’s seriously considering the offer. Right now, she pays $2,350 a month in rent, and the landlord is offering to sell the house for $450,000.

Beth has spoken with her bank, and with a 20% down payment and an interest rate of 6.95% on a fixed 30-year mortgage, her monthly mortgage payments would be about the same as her rent—$2,383. On the surface, it seems like a great deal. However, Beth has never owned property before and is nervous about taking the leap. As she weighs the pros and cons, she’s wondering if she might be overlooking some important factors.

Hidden Costs of Buying a House

It’s common to compare rent payments to the monthly cost of a mortgage, but the ongoing costs of owning a home can extend far beyond the mortgage itself. Many first-time buyers budget for the down payment but often neglect or underestimate other costs that come due before or at closing.

In addition to the down payment, Beth will need to pay various fees to acquire her new home. These include closing costs, appraisal and inspection fees, escrow fees, attorney fees, and other small administrative costs. Closing costs typically range from 2% to 5% of the purchase price, according to Zillow.

Owning a home also brings expenses that Beth doesn’t face when renting. These include property taxes, higher insurance premiums, repairs and maintenance, and potential homeowner’s association or condo fees.

“The overall monthly costs of owning, including mortgage payment, insurance, and taxes, was more expensive than renting in three out of every five of the major metros in the U.S. after 20% down, at the start of 2024,” wrote Susan Kelleher in an article for Zoom.

The average property tax bill in the U.S. was $4,380 in 2023, according to the American Community Survey. As for insurance, the average annual cost for renter’s insurance (for up to $300,000 in liability) was $263 in January 2025, according to Insurance.com. Meanwhile, the average cost of homeowners insurance was $2,601 per year as of March 2025.

There's also a common rule of thumb that says you should set aside about 1% of your property value each year for repairs and maintenance.

Opportunity vs. Opportunity Cost

While it’s not paid out of pocket, there’s also an opportunity cost to buying a home. Opportunity cost refers to the value you pass up by using your money to buy a house instead of something else. There are both financial and non-financial opportunity costs to buying a home.

Money that Beth spends on the down payment—as well as the extra expenses that come from homeownership—is money she won’t have available for other investments. Some studies have shown that over the long term, houses have historically underperformed compared to the stock market as an investment.

“Stocks have returned, on average, about 8% to 12% per year while real estate has generated returns of 2% to 4% per year,” Peter Earle, an economist at the American Institute for Economic Research, told U.S. News.

One of the biggest non-financial opportunity costs is the loss of freedom. When you own a house, it’s much harder to move to a new place—or a new city or country—and there are higher transaction costs to doing so.

Even given these opportunity costs, there can be psychological and social benefits to owning a home—and Beth may still want to buy one. But she’ll also want to consider what she might be giving up and whether she’s okay with that.

Getting Your Financial Ducks in a Row

After assessing all the costs of buying a home, Beth may also want to consider whether she’s financially ready. For example, she’ll likely need a steady source of income such as a secure job or a healthy business, and she’ll want to pay off any high-interest debt to help improve her credit score and ensure she can meet her higher monthly housing expenses.

Ideally, Beth will have an emergency fund and insurance to help cover losses to her income if she’s struck with an emergency, illness, or disability. In setting a target for her down payment, she should also account for closing costs and for the potential that her lender may want her to prove that, after closing, she’ll have up to six months of reserves for mandatory housing expenses such as taxes and insurance.

The U.S. Department of Housing and Urban Development has resources that can help first-time homebuyers assess their readiness, but Beth may want to talk to an advisor who can help her create a financial plan that will lead her to homeownership if she’s not ready today.