Where to Invest?
This site is an application to help understand how investing in the stock market compares to real estate. The buttons below hold some calculation presets that display results in the chart below, and we hope you take us up on the invitation to play with the input sliders below the chart to visualize a variety of scenarios.
The Code
An explanation of strategy is at the bottom of this page. Code and calculations on GitHub.
Where are you going to put your money?
This site is an application to help understand how investing in the stock market compares to real estate. The buttons below hold some calculation presets that display results in the chart below, and we hope you take us up on the invitation to play with the input sliders below the chart to visualize a variety of scenarios.
Helpful References
Investment Inputs
You have choices to make! How much money do you want to start off with and for how long are you willing to leave it invested? Give it some thought, adjust the sliders and continue on to the stock and real estate related inputs.
Investment Amount and Time
Stock Market
Select the interest rate return with this slider.
Do you "prefer to play it safe" with bonds and treasury bills or prefer the potentially greater returns that come with higher risk? Although the broader stock market has historically gone up approximately 10% a year, there is great variation between investment vehicles and time periods.
Stock Input and Calculations
Percentage
Stock Calculation Results
Real Estate Market
Some of the considerations related to property investment in addition to appreciation are repair, maintenance, taxes, insurance, vacancy rates and selling costs such as realtor commissions. Additionally, real estate values are location dependent with rural or low income areas generally less likely to accelerate in value than their counterparts but also may be less expensive to maintain.
Other things to consider when evaluating real estate investment is the time consuming nature of ownership and possible tax advantages.
Selling costs of 6% are automatically calculated for the user. This is based on a broker commission of 5%. The remaining 1% is for title costs, buyer negotiated credits and attorney fees.
Real Estate Inputs and Calculations
House price as calculated
House Mortgage
Monthly Rental Icome
Yearly Maintenance Amount
Vacancy Rate
House Appreciation Percentage Yearly
Real Estate Calculation Parameters
The buttons produce results that rely, with some variation on the following for real estate: Invested amount is considered as a 20% deposit on a house and therefore the home value is 5 times this figure. Also, we assumed a monthly rental income that covers mortgage, insurance and taxes. Additionally, we factored a vacancy rate of 4% and appreciation of 3.5%. There is some variation in the "Strong Real Estate" calculation which assumes a handy landlord and a bit of good luck. To see specifics, reference the slider output below the chart.
Stock Calculation
Stock appreciation is compounded just as the real estate values are, however the initial investment amount is automatically deducted, so what is reflected in the stock investment output is the net difference between final portfolio value less the initial amount.
Caveats
Some caveats to bear in mind are that real estate mortgages are amortized. This is not reflected in the results, so at the end of 30 years, one could argue that $200,000 (the mortgage amount) should be added to the final calculation because the mortgage would be paid off, however a counter argument might be that to keep things equal, more money should be added to the stock market investment too. This is something we chose to keep out of our calculations and therefore up it is up to the reader to adjust.