Rent or buy: how to do an honest calculation

Add up every payment: rent, utilities (if not included), internet. That is the full monthly cost of housing while renting. The deposit is a temporary expense, it will come back; spread the agency commission over the term of the lease.

Renting allows you to change job, district or country without losing your investment. That flexibility has real financial value — especially if you are at the start of your career or work in an unstable industry.

If you rent, the down payment (which you do not pay) keeps sitting on deposit and earning a return. That yield reduces the real cost of renting. Add it to the calculation — otherwise the comparison is not honest.

Add to the monthly payment: property tax, building insurance, the cost of managing the home (if the flat is in a building with an HOA). In the early years 70–80% of the payment goes on interest, not on reducing the debt.

The international standard is to budget 1–2% of the flat's value a year for technical maintenance and repairs. On a flat at 80,000 AZN that is 800–1,600 AZN a year. Owners often forget this until the time comes to change pipes or windows.

Notary, registration, valuation, agent's commission — on purchase, 3–6% of the price. On sale, another 2–4%. In total 5–10% of the price of the flat 'disappears' just on entry and exit. If you plan to live there less than 5–6 years, this one-off expense is hard to recoup.

In Azerbaijan, income from selling a property held for less than 3 years is subject to income tax. Check the current rules before buying — in some cases the tax eats up the entire 'capital gain' on the flat in the first years.

Add up every one-off cost of buying and selling. Divide by the monthly difference between the full cost of renting and the full cost of ownership. The result is the number of months after which buying starts to 'win'. In Baku this is usually 5–8 years.

If you plan to live in the city for less than 4–5 years, renting almost always wins financially. If the rent on an equivalent flat is less than 4% of its price a year, the market is overheated and buying is not a good deal.

A long horizon (7+ years), stable income, a down payment that does not damage your emergency fund, low rental yield in the market — under these conditions buying is usually more efficient. If the feeling of 'a place of your own' has high personal value for you, that is also part of the calculation.