Thinking about whether to keep renting or finally buy in East San Jose over the next five years? You are not alone. With mortgage rates, rent caps, and home prices all in the mix, it can be tough to see which path actually costs less. In this guide, you will get a clear, step‑by‑step way to compare the 5‑year costs of renting versus buying, tailored to East San Jose’s market profile. You will also see example scenarios, a break‑even point, and the key factors that could shift the outcome for you. Let’s dive in.
How we define East San Jose
For this analysis, “East San Jose” refers to ZIP codes 95116, 95121, 95122, and 95127. These areas include neighborhoods commonly associated with East San Jose such as Alum Rock, Mayfair, portions of the Evergreen foothills, and parts of Berryessa.
To keep the comparison useful for you, we focus on this specific geography. If your target home or rental is outside these ZIP codes, the numbers can change, so use the method below and plug in your own figures.
What goes into the 5‑year math
A strong rent vs buy comparison adds up your cash flows over five years and then nets out the value you keep at the end. Here is what to include.
Buying costs to include
- One‑time at purchase: down payment, loan closing costs, inspections
- Monthly: mortgage principal and interest, property taxes, homeowners insurance
- Other recurring: maintenance and repairs, HOA dues if a condo or townhome
- If less than 20% down: Private Mortgage Insurance may apply
- At sale in year 5: agent commissions, escrow/title fees, light repairs or staging
- Tax items: mortgage interest and property tax deductions subject to limits
- Opportunity cost: what your down payment might have earned if invested
Renting costs to include
- Upfront: security deposit, first month’s rent, moving expenses
- Monthly: rent, renters insurance
- Rent growth: annual increases within legal limits
- Opportunity benefit: invested growth on the cash you did not use as a down payment
Taxes and rules that matter
- Mortgage interest and property tax deductions: See IRS guidance on the mortgage interest deduction in Publication 936. State and local tax deductions are subject to a $10,000 cap.
- Capital gains exclusion on sale: If you use and own the home for two of the five years before selling, you may exclude up to $250,000 of gain if single or $500,000 if married filing jointly. See IRS Publication 523.
- Property taxes: California’s Proposition 13 limits assessed value increases after purchase; check parcel details with the Santa Clara County Assessor.
- Rent caps and protections: California’s Tenant Protection Act of 2019 (AB 1482) generally caps annual increases at 5% plus CPI, up to 10% in a 12‑month period, for many units. Review the statute text for scope and exemptions via California Legislative Information.
Assumptions for the examples
Below is a simple, illustrative 5‑year model to show how the math works. It is not tied to a specific East San Jose property. Use it as a template and replace with your numbers.
- Home price: $900,000
- Down payment: 20% ($180,000)
- Loan: $720,000, 30‑year fixed at 6.5% APR. For rate benchmarks, see Freddie Mac’s Primary Mortgage Market Survey.
- Buyer closing costs: 2% of price ($18,000)
- Property tax: 1.16% of purchase price ($10,440 per year)
- Homeowners insurance: $1,200 per year
- Maintenance: 1% of home price per year ($9,000)
- Sale costs in year 5: 5% commission
- Home price appreciation: 3% per year in the baseline example
- Comparable rent: $3,000 per month, increasing 3% per year
- Renter invests the $180,000 at 6% annual return
What the baseline math shows over five years:
- Owner total outflows: down payment, closing, mortgage payments, taxes, insurance, maintenance ≈ $574,200
- Owner net proceeds at sale after 5 years: ≈ $316,905
- Owner net 5‑year cost: ≈ $257,295, about $4,288 per month
- Renter total rent plus insurance minus investment growth: ≈ $131,488, about $2,191 per month
Under these specific inputs, renting looks cheaper over five years. The outcome can flip if appreciation is stronger, rates are lower, you buy a lower‑maintenance home, or you plan to own longer than five years.
Scenario check: what moves the needle
To see which levers matter most, change one input at a time and compare the 5‑year totals.
- Pessimistic appreciation: If home price growth is 0% instead of 3%, the owner’s net 5‑year cost rises to about $393,240, or roughly $6,554 per month. Renting remains cheaper in this case.
- Strong appreciation: If appreciation is 6% per year, the owner’s net 5‑year cost falls to about $104,057, or about $1,734 per month. Buying becomes cheaper than renting under this assumption.
- Faster rent growth: If rent grows 6% per year, the renter’s 5‑year net cost rises modestly to roughly $141,132, or about $2,352 per month. Buying can still be cheaper if appreciation is strong or if your financing terms improve.
These are illustrative, but they show the key point. Appreciation, followed by your mortgage rate and your time horizon, typically has the biggest impact on the 5‑year result.
Break‑even appreciation rate
A common question is, “At what price growth does buying break even with renting over 5 years?”
In the example above, buying and renting break even at roughly 5.5% annual appreciation. If your actual mortgage rate is lower, your closing costs are lower, or your rent is higher, the break‑even rate drops. If your costs are higher or your rent is lower, it rises.
How to estimate your break‑even:
- Compute your owner net cost with your own inputs.
- Increase annual appreciation and recalc the year‑5 sale price.
- Recompute sale proceeds at the higher price and subtract from your total outflows.
- Compare that owner net cost to your renter net cost. Iterate until they match.
How to run your own numbers
Use these steps to build a simple, transparent 5‑year model you can update anytime.
Define your area and home type
- Use the East San Jose ZIPs above and pick a target home size and age. If you are considering a condo, add HOA dues.
Pull current price and rent
- Use trusted sources for median sale price and typical rents for your home type and ZIP.
Set financing terms
- Note today’s 30‑year fixed rate from a lender or Freddie Mac PMMS. Decide on down payment and estimate closing costs at about 2% of price.
Add recurring owner costs
- Property taxes: start with about 1.1% to 1.3% of purchase price, then check parcel details with the Santa Clara County Assessor.
- Insurance: use an annual estimate for your property type.
- Maintenance: budget 1% to 3% of price per year depending on age and condition.
Add renter details
- Set your starting rent, renters insurance, and a realistic annual rent growth rate that respects AB 1482 caps where applicable.
- Decide how you would invest your down payment funds and pick a conservative growth rate for that investment.
Model the sale in year 5
- Choose three appreciation cases: pessimistic, baseline, optimistic.
- Subtract selling costs and the remaining loan balance from the year‑5 sale price to estimate net proceeds.
Compare totals
- Owner net cost = all 5‑year outflows minus sale proceeds.
- Renter net cost = 5‑year rent and insurance minus the investment growth of your saved cash.
Tip: Run a second set of scenarios with a different mortgage rate and a longer time horizon. Many buyers find that a 7 to 10‑year hold smooths out upfront costs and favors ownership if appreciation and amortization compound.
Beyond the math: lifestyle and risk
Numbers are critical, but your lifestyle goals matter too.
- Stability and control: Owning can give you more control over improvements and predictability if you plan to stay put, while renting offers flexibility.
- Maintenance responsibility: Owners budget for repairs. Renters typically call the landlord.
- Mobility: If you expect to move for work or family within five years, renting may reduce friction.
- Market risk: Buying exposes you to price swings, which can help or hurt over a short horizon. Renting reduces exposure to home price changes but exposes you to rent increases.
Local context that may shape results
- Relative affordability: East San Jose often trades at lower median prices than many other parts of San Jose. That can lower the required down payment and shrink the gap between renting and buying.
- Commute and transit: Access to VTA light rail, freeway corridors, and BART to the Berryessa area can influence demand and appreciation trajectories.
- Inventory cycles: When inventory tightens, prices tend to be supported. When inventory rises, appreciation can slow. Watch monthly reports from local Realtor associations and data providers for trend direction.
- Rent regulation: Many units in San Jose fall under AB 1482’s rent caps, which can help you set a reasonable rent growth assumption for your analysis.
What this means for you
In a five‑year window, the tipping points are appreciation, your mortgage rate, and how long you expect to stay. In the illustrative baseline above, renting looks cheaper. With stronger appreciation or improved financing, buying can win even over a five‑year horizon. If you are weighing East San Jose, you will want numbers based on your specific ZIP, property type, and loan options.
Want a custom side‑by‑side for your target address, plus local financing pathways and an action plan? Connect with Mariano Peralta for a free, personalized 5‑year rent vs buy report. We can review down payment options, estimate local taxes and costs, and map next steps. Hablamos español.
FAQs
What area of East San Jose does this cover?
- This guide uses ZIP codes 95116, 95121, 95122, and 95127, which include areas commonly considered East San Jose such as Alum Rock, Mayfair, evergreen foothill neighborhoods, and parts of Berryessa.
What home price and rent were modeled in the example?
- The example uses a $900,000 purchase with 20% down and a comparable $3,000 monthly rent, both with specified growth assumptions, for illustration only.
How sensitive is the 5‑year result to mortgage rates?
- Very. Lower rates reduce monthly payments and increase principal paid, which lowers the owner’s net cost and reduces the break‑even appreciation needed to beat renting.
How do California rent caps affect rent growth assumptions?
- AB 1482 generally limits increases to 5% plus CPI, capped at 10% in any 12 months for many units, so your rent growth assumption should stay within those limits when applicable.
What tax benefits could change the outcome for buyers?
- The mortgage interest deduction and a portion of property taxes can help, subject to IRS rules and the $10,000 SALT cap, and many sellers may qualify for the home sale gain exclusion after two years of ownership and use.
What should I budget for selling costs after five years?
- A common estimate is around 5% to 6% of the sale price for agent commissions plus escrow, title, and modest prep or repairs, though actual costs vary by property and market conditions.
How can I get a personalized East San Jose rent vs buy analysis?
- Request a free, local 5‑year side‑by‑side with pricing, rent comps, and financing scenarios by contacting Mariano Peralta.
