Rent vs. Buy In San Mateo: A 5-Year Cost Model

Is buying a condo in San Mateo really worth it over the next five years, or should you keep renting and invest the difference? It is a big decision, and the numbers in the Bay Area can feel overwhelming. You deserve a simple, transparent framework that puts cash flow, equity, taxes, and risk on the same page. In this guide, you will see a clear 5-year rent-versus-buy model tailored to San Mateo condos and townhomes, plus an easy way to plug in your own numbers. Let’s dive in.

What this 5-year model answers

• Your total out-of-pocket costs over 5 years for renting vs buying.
• Your equity after 5 years, after selling costs.
• The net cost of housing after tax benefits and appreciation.
• How sensitive the result is to mortgage rate, HOA dues, appreciation, rent growth, and the return on your invested cash.

How the model works

We compare two paths over a 5-year holding period for a San Mateo condo or townhome:

• Renting: Sum of rent payments and renters insurance, minus the growth of money you keep invested instead of using it for a down payment and closing costs.
• Buying: All ownership costs after taxes, plus buyer closing costs, plus pre-sale prep, minus your net sale proceeds after paying off the mortgage and paying typical selling costs.

Key pieces we include, consistent with California rules and Bay Area norms:

• Mortgage payments using a 30-year fixed rate. See current averages from the Freddie Mac Primary Mortgage Market Survey.
• Property taxes under Prop 13. New buyers are typically assessed on purchase price plus local assessments. See the San Mateo County Assessor for local rates and parcel charges.
• HOA dues for condos and townhomes, which vary widely.
• Homeowners insurance for a condo policy, plus optional earthquake insurance. Learn about earthquake coverage at the California Department of Insurance.
• Mortgage interest deduction limits and the SALT cap. See IRS Publication 936 for mortgage interest rules and IRS Topic No. 503 for the state and local tax deduction limit.
• Section 121 home sale exclusion for primary residences. See IRS Publication 523.

We also test appreciation scenarios to reflect Bay Area volatility. For high-level context on price trends, see the FHFA House Price Index.

Baseline assumptions for San Mateo condos

These are illustrative inputs you can adjust. They reflect typical ranges from the research framework for the Peninsula.

• Home price: $1,100,000 purchase price for a 2-bedroom condo or townhome.
• Down payment: 20 percent baseline. We also test 10 percent with PMI.
• Mortgage rate: 6.5 percent baseline 30-year fixed. Rates change, so check Freddie Mac PMMS.
• HOA dues: $650 per month.
• Property tax: 1.2 percent of purchase price per year.
• Insurance: $1,000 per year for a condo policy. Earthquake optional and modeled separately.
• Maintenance and repairs: 0.5 percent of price per year, assuming HOA covers exterior.
• Buyer closing costs: 3 percent of purchase price.
• Seller costs at year 5: 5.5 percent agent commissions plus 1 percent other closing costs, plus $5,000 for prep.
• Rent for a comparable condo: $3,800 per month baseline.
• Rent growth: 3 percent per year baseline.
• Investment return on saved cash when renting: 6 percent per year baseline.
• Taxes: 32 percent marginal combined federal plus state used for modeling interest deduction. SALT cap assumed to limit additional property tax deductibility.

These inputs are not predictions. They are a starting point you can tailor to your unit, HOA, rate quote, and budget.

Scenario results at a glance

The table below shows three 5-year scenarios using the assumptions above. All figures are rounded and illustrative.

How to read this:

• Buyer 5-year net cost includes all ownership cash outlays after estimated tax benefits, plus down payment and buyer closing costs, minus net sale proceeds.
• Renter 5-year net cost includes total rent and renters insurance minus the growth of the down payment and closing costs invested instead.
• Positive differences mean buying costs more than renting over 5 years. Negative would mean buying is cheaper on a net basis.

In the baseline, buying costs about $2,150 more per month on a net basis over five years, driven by the mortgage rate, HOA dues, and selling costs. In the optimistic case with strong appreciation and a lower rate, the gap narrows.

What moves the breakeven most

These inputs have the biggest impact on your 5-year outcome:

• Home price appreciation. A 1 percent change in annual appreciation can swing your net result by tens of thousands at resale.
• Mortgage rate. A lower rate reduces monthly interest and boosts after-tax cash flow.
• HOA dues and special assessments. High fixed HOA dues can tilt the math toward renting over short horizons.
• Opportunity cost of cash. If your down payment could compound at a high rate, renting looks better. If you would keep that cash in low-yield savings, buying looks better.
• Rent growth. Faster rent growth raises the cost of renting and can shorten the breakeven horizon.

Taxes in plain English

• Mortgage interest deduction. Mortgage interest may be deductible, but loans originated after 2017 are generally subject to a $750,000 limit for deductible mortgage debt. See IRS Publication 936 for details.
• SALT cap. The deduction for state and local taxes, including property tax, is capped at $10,000. Many Peninsula households hit this cap with state income taxes alone, so we model little to no additional property tax benefit. See IRS Topic No. 503.
• Home sale exclusion. If you own and live in the home for at least 2 of the past 5 years, you can often exclude up to $250,000 of gain if single or $500,000 if married filing jointly. See IRS Publication 523.

Tax results vary by household. Use these rules to estimate, then confirm with your tax professional.

Local San Mateo factors to budget

• HOA reserves and assessments. Review HOA budgets, reserve studies, and meeting minutes. Special assessments can materially change your ownership cost.
• Earthquake insurance. Standard condo policies do not include earthquake coverage. Premiums can be meaningful in the Bay Area. Start at the California Department of Insurance.
• Prop 13 mechanics. Your assessed value resets at purchase, then annual increases are capped. See the San Mateo County Assessor for local details.
• Mobility risk. If you may move in under 5 years, the drag from selling costs is significant. Renting often wins at short horizons.

How to plug in your numbers

Use these steps to customize the model to your unit and timeline:

1. Set your purchase price and HOA dues. Pull 3 to 5 recent condo or townhome sales you would consider and note dues.
2. Get a real rate quote. Check the trend at Freddie Mac PMMS, then ask your lender for a personalized estimate with points and PMI if applicable.
3. Pick your down payment and closing cost estimate. Use 2 to 3.5 percent for buyer closing costs.
4. Choose your appreciation and rent growth. Test 0, 3, and 5 percent for appreciation, and 2 to 5 percent for rent growth.
5. Add property tax and insurance. Use 1.05 to 1.25 percent for property tax. Budget $500 to $1,500 per year for a condo policy.
6. Decide on maintenance and any earthquake plan. Start with 0.3 to 1.0 percent of price per year for maintenance. Add earthquake insurance if you plan to carry it.
7. Model taxes conservatively. Apply the $750,000 mortgage interest limit and the $10,000 SALT cap in your estimate.
8. Compare three scenarios. Run conservative, baseline, and optimistic side by side. Look at the monthly-equivalent net cost and your breakeven horizon.

If you want a spreadsheet you can edit, reach out and we will share our template.

When buying can pay off

Buying tends to pay off sooner when at least two of these line up for you:

• You plan to stay 7 to 10 years or more.
• You lock a lower mortgage rate or plan to refinance when rates drop.
• Your building has modest HOA dues and healthy reserves.
• Rent growth is strong in your submarket.
• You value housing stability and the forced savings of principal paydown.

Buying tends to lag renting over a 5-year window when rates are high, appreciation is flat, HOA dues are high, or you may need to sell soon and pay transaction costs.

Final thoughts

San Mateo is a dynamic, high-cost market, and short-horizon math is especially sensitive to rates, HOA dues, and appreciation. A numbers-first model helps you make a confident call that fits your goals, risk tolerance, and timeline. If you want a custom 5-year analysis for a specific building or unit, the Heather Lin Real Estate Team can run the numbers with your rate quote, HOA, and tax profile, then map out next steps.

Ready to compare your actual options side by side? Schedule a Free Consultation with the Heather Lin Real Estate Team.

FAQs

What is the main difference between renting and buying over 5 years in San Mateo?

• Renting has lower upfront costs and keeps your cash invested, while buying has higher monthly and upfront costs but builds equity through principal paydown and potential appreciation.

How do HOA dues affect a condo rent-versus-buy decision?

• Higher HOA dues are a fixed drag on ownership cash flow, which can push the breakeven out several years compared with renting, especially when rates are elevated.

Do I get a property tax deduction on a San Mateo condo?

• Many Peninsula households already reach the $10,000 SALT cap with state income taxes, so we model little to no extra benefit from property taxes, though mortgage interest may still be deductible.

How much appreciation should I assume for a San Mateo condo?

• Test a range, such as 0, 3, and 5 percent annually, since Bay Area prices can be volatile and your building’s HOA health and location will influence outcomes.

What if I plan to move in under 5 years?

• Selling costs can be 6 to 7 percent of the sale price plus prep, so shorter timelines usually favor renting unless you expect strong appreciation or have unusually low ownership costs.

Should I add earthquake insurance to the model?

• Yes, if you plan to carry it, because premiums can be material in the Bay Area and will change the monthly cost of ownership.

Where can I check today’s mortgage rates?

• Use the weekly Freddie Mac Primary Mortgage Market Survey to see current average rates for 30-year and 15-year fixed loans.