Quiet Zeros

Calculators / Saving & investing

Rental property, or the S&P 500?

Landlords count the rent and forget the roof; index-fund arguments forget that leverage cuts both ways. This prices every cost and every tax break on both sides, at your numbers. Nothing you type leaves this page.

$

Enter $10,000 to $20,000,000.

%
%
yrs
% of price
$
$
%

Months empty between tenants, averaged - 6-8% is typical.

%/yr
%/yr of value
%/yr of value
%/yr of value

Roofs, HVAC, turnover - 1-1.5% of value yearly is the standard landlord reserve.

% of rent

Set to 0 if you self-manage - but then your time isn't free either.

$/mo
%/yr
% of price

Only the structure depreciates. 80% is a common rule of thumb; your tax bill has the real split.

%

Agent commission plus closing costs when you eventually sell.

yrs
$

Rental losses offset other income dollar-for-dollar up to $25,000 if you actively manage - phasing out $100k-$150k MAGI.

%
%
%/yr

The alternative: put the same cash in an index fund instead.

Rental property ends

—

Property, after tax & sale

—

S&P 500, same cash

—

Total invested

—

Avg. after-tax cash flow

—

Terminal wealth over the holding period - property vs. index fund

Where the property’s advantage (or disadvantage) comes from

Year by year: cash flow, depreciation, and both balances

How this is calculated

Both paths start with the identical cash: your down payment, closing costs and rehab money. The property path runs a real landlord's year, every year of the holding period: rent grows and a vacancy discount is applied, then property tax, insurance, maintenance and management costs (each a percentage of the CURRENT home value or rent, so they grow with the property) are subtracted, then the mortgage payment. What's left is cash flow - and it's taxed or sheltered honestly: mortgage interest and straight-line depreciation (structure value ÷ 27.5 years) reduce taxable rental income, and losses offset up to $25,000 of your other income before phasing out between $100,000 and $150,000 of it, exactly like the IRS passive-activity rules. The index-fund path grows the same starting cash at your expected return - and whenever the property needs extra cash in a bad year, the index path gets that same extra contribution too, so neither side is unfairly starved of capital.

depreciation/yr = (price × building %) ÷ 27.5  ·  taxable rental income = rent collected − operating costs − mortgage interest − depreciation

What happens at the end

The property sells at your appreciation rate, minus selling costs and the remaining loan. The gain is split two ways for tax: the depreciation you claimed gets "recaptured" at a flat 25%, and the rest of the gain is taxed at your capital-gains rate - both real IRS rules, not simplifications. Any positive cash flow collected along the way is assumed reinvested in the same index fund (with its own capital-gains tax applied at the end), so a landlord who banks the rent isn't penalized for not having spent it.

The honest tilt

Real estate wins on leverage (you control a $320,000 asset with a fraction down) and on the depreciation shield; the S&P wins on liquidity, zero maintenance calls, and never needing a new roof at 2am. This tool prices the money; it can't price the phone call from a tenant.

Notes

Assumes steady occupancy at the stated vacancy rate (not lumpy real turnover), a constant marginal rate, and a sale at the end of the exact holding period. 1031 exchanges (which defer this sale tax entirely) aren't modeled - if you plan to exchange rather than cash out, the property side understates its result.

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