Real Estate vs S&P 500 Calculator
Should you put your money into a rental property or an index fund? This calculator models both investments in detail — factoring in leverage, mortgage costs, rental income, appreciation, taxes, maintenance, dividends, and compounding — to show you exactly which comes out ahead over your time horizon.
| Year | RE: Property value | RE: Net equity | RE: Annual cash flow | S&P: Portfolio value | S&P: Annual gain | Leader |
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How this calculator works
This calculator models both investments from first principles rather than using simplified rules of thumb. For real estate, it builds a full year-by-year amortization schedule, grows rental income annually, deducts vacancy, maintenance, taxes, insurance, and mortgage interest, and applies capital gains tax on the profit at sale. For the S&P 500, it compounds the initial investment and any monthly contributions at the expected return, accounts for dividends (reinvested or taken as cash), deducts the expense ratio, and applies capital gains tax at exit.
Why leverage changes everything in real estate
The most important factor that makes real estate comparisons complex is leverage. When you put $200,000 down on an $800,000 property, you control a $800,000 asset. A 4% appreciation on $800,000 is $32,000 — a 16% return on your $200,000 cash. No stock market investment gives you this kind of leverage at institutional rates. This is why real estate often outperforms on a cash-on-cash basis in the early years even when the gross returns look similar.
What the calculator doesn’t include
This model excludes depreciation tax deductions (which favor real estate), 1031 exchanges (which defer capital gains indefinitely), potential rent control regulations, major capex events (new roof, HVAC), HOA fees if applicable, property management costs if you hire a manager (~8–10% of rent), and the significant time cost of being a landlord. On the S&P 500 side, it excludes behavioral drag (selling at the wrong time) which historically reduces real investor returns by 1.5–2% annually versus the index return.