Buying Versus Renting Analysis

This problem practices a classic corporate finance comparison between two long term uses of capital, and it tests whether you can frame a personal decision as an investment analysis. The key skills are identifying the relevant cash flows, making consistent assumptions about housing costs and investment returns, and comparing alternatives on a like for like basis using IRR or a similar return framework.

Interviewers ask this kind of question to see whether you can think in terms of opportunity cost, leverage, risk, taxes, and liquidity rather than just monthly affordability. A strong answer shows that you can separate the economics of owning from the economics of renting, think carefully about what happens to the cash that is not tied up in a down payment, and explain why the decision depends on both expected returns and non financial tradeoffs.