Stocks vs Real Estate Calculator: The 20-Year Verdict

How the verdict is worked out

Three endings, one formula each. Stocks are simple compounding: the amount times one plus the yearly return, raised to the number of years. $100,000 times 1.102 to the power of 20 is $100,000 times 6.9764, which is $697,640.83 — 6.98 times your money. Unleveraged property is the same compounding on the house price, plus the rent: $100,000 times 1.046 to the power of 20 is $245,829.33, and the rent is 3.0% of a property that grows at 4.6% a year, which adds up to $95,106.08 over 20 years — together $340,935.41, or 3.41 times your money. The gap is the two endings subtracted: $697,640.83 minus $340,935.41 is $356,705.42 in stocks’ favour. Leveraged property starts from a bigger base: a 20% down payment turns $100,000 into a $500,000.00 property with a $400,000.00 mortgage, so the same 4.6% growth works on five times the money — the property reaches $1,229,146.63, and after the $222,661.13 mortgage balance still owed after 20 years, the equity is $1,006,485.50. Then the rent minus the mortgage payments is added: $475,530.41 of rent against $606,785.30 of payments leaves -$131,254.89 — and the leveraged total is $875,230.61, ahead of stocks by $177,589.78.

The worked example, line by line

Setup: $100,000 invested, 20 years, stocks 10.2% a year, home appreciation 4.6% a year, net rental yield 3.0%, mortgage 6.5%, down payment 20%.

Line 1 — stocks growth factor. 1.102 to the power of 20 = 6.9764.

Line 2 — stocks ending. $100,000 × 6.9764 = $697,640.83, or 6.98× your money.

Line 3 — property value, no mortgage. 1.046 to the power of 20 = 2.4583, so $100,000 × 2.4583 = $245,829.33.

Line 4 — rent, no mortgage. 3.0% of a property growing at 4.6% a year for 20 years adds up to $95,106.08.

Line 5 — unleveraged total. $245,829.33 + $95,106.08 = $340,935.41, or 3.41× your money.

Line 6 — the gap without a mortgage. $697,640.83 − $340,935.41 = $356,705.42 in stocks’ favour.

Line 7 — property price with leverage. $100,000 / 0.20 = $500,000.00, with a $400,000.00 mortgage.

Line 8 — monthly payment. $400,000.00 at 6.5% fixed for 30 years = $2,528.27 a month.

Line 9 — property value with leverage. $500,000.00 × 2.4583 = $1,229,146.63.

Line 10 — equity. $1,229,146.63 − the $222,661.13 balance still owed = $1,006,485.50.

Line 11 — net rent after mortgage. $475,530.41 of rent − $606,785.30 of payments = -$131,254.89.

Line 12 — leveraged total. $1,006,485.50 + -$131,254.89 = $875,230.61, ahead of stocks by $177,589.78.

Every branch, checked

Over 10 years: $100,000 times 1.102 to the power of 10 is $264,128.91 in stocks — 2.64 times — against $100,000 times 1.046 to the power of 10 plus rent, which is $193,826.05 — 1.94 times. Stocks are ahead by $70,302.86, less than a fifth of the 20-year gap: the lead compounds, so it grows fastest in the later years. Leveraged property reaches $326,633.11 at 10 years, ahead of stocks by $62,504.20 — again only by funding $118,209.65 of negative cash flow.

Over 30 years: $100,000 times 1.102 to the power of 30 is $1,842,671.15 in stocks — 18.43 times — against $100,000 times 1.046 to the power of 30 plus rent, which is $571,587.36 — 5.72 times. Stocks are ahead by $1,271,083.79. Leveraged property reaches $1,947,758.86 once the mortgage is paid off — the only horizon where the rent finally covers the mortgage, by $20,586.58 over the full 30 years.

Stocks at 8% a year: $100,000 times 1.08 to the power of 20 is $466,095.71 — 4.66 times — against $340,935.41 in unleveraged property, so stocks still win by $125,160.30, but fall behind leveraged property $875,230.61 by $409,134.90. Two points of return cost stocks $231,545.12 over 20 years.

Home appreciation at 3.5% a year: the property value is $100,000 times 1.035 to the power of 20, which is $198,978.89, and with rent the unleveraged total is $283,817.93 — stocks ahead by $413,822.90, wider than the $356,705.42 gap at 4.6% appreciation. A single point of slower price growth costs property $57,117.48 over 20 years.

Net rental yield at 4% a year: the unleveraged total is $372,637.44 — stocks ahead by $325,003.39. Each extra point of yield adds $31,702.03 over 20 years, so the rent you actually collect matters more than the price growth: a property that rents well beats one that merely appreciates.

The honest flip: the $131,254.89 catch

Leveraged real estate wins the headline — $875,230.61 against $697,640.83 — but the win is bought, not free. The rent of $475,530.41 over 20 years does not cover the $606,785.30 of mortgage payments at $2,528.27 a month, leaving -$131,254.89: about $6,562.74 a year out of pocket, every year, before any repair bill, vacancy, or rate rise. That is the price of the leverage. The same $100,000 in stocks costs nothing to hold and can be sold in a day; the property needs the cash every month and cannot be sold in pieces. The flip is real but conditional: if you cannot fund the negative cash flow for twenty years, the leveraged win never happens — and the unleveraged comparison, which stocks win by $356,705.42, is the honest one. The way to use the flip is as a question about cash flow: if the rent covered the mortgage, the leveraged win would be clean. At 3.0% yield it does not — see the build vs buy home comparison for the same cash-flow question from the other side.

What the defaults assume

The defaults are long-run averages, not promises: stocks at 10.2% a year is the S&P 500’s long-run nominal return, the same basis used on this site’s stocks vs bonds page, and home appreciation at 4.6% a year is the long-run US house-price growth rate. The 3.0% net rental yield is rent after maintenance, vacancy, tax, and insurance, as a percent of the property’s current value — a realistic net yield for a typical US rental, not the gross yield agents quote. The mortgage is a fixed 6.5% for 30 years with no refinancing, no extra payments, and no rate change. The calculator assumes one constant return and one constant appreciation rate every year — no crashes, no booms, no sequence — so it shows the average outcome, not any real 20-year path. It counts no buying or selling costs, no capital-gains tax on the stocks, and no management fees on either side: add those and both endings fall, and the stocks’ ending falls less. It also assumes the rent grows with the property value, which is how rents behave over long stretches but not in any single year.

Rounding convention, stated plainly: endings are rounded to cents — $697,640.83, $340,935.41 — and multiples to two decimals — 6.98×, 3.41×. The gap is the rounded endings subtracted, so $697,640.83 minus $340,935.41 is $356,705.42. The mortgage payment is the standard amortisation formula on a 30-year term, and the balance after 20 years is the amortised balance at that point.

Output · formula · meaning

Who uses this

• The first-time landlord: has $100,000 and learns the $500,000 property reaches $875,230.61 — but only by funding $131,254.89 of negative cash flow at $2,528.27 a month — so the decision turns on whether the monthly shortfall is affordable, not on the headline.
• The index investor: compares $697,640.83 in stocks against $340,935.41 in unleveraged property and learns stocks win by $356,705.42 with no mortgage, no tenants, and no monthly bill — the simplest version of the same $100,000.
• The 10-year horizon saver: needs the money sooner and learns the 10-year gap is only $70,302.86 — and that the leveraged win at 10 years still costs $118,209.65 of negative cash flow — so the shorter horizon argues for stocks.
• The yield-focused buyer: shops by rent, not by price growth, and learns each extra point of net yield adds $31,702.03 over 20 years — a 4% yield property at $372,637.44 beats a 3% yield property at $340,935.41 by that much.

Accuracy & limitations

The math is exact for the numbers you enter: the future value is the amount times one plus the yearly return, raised to the number of years; the rent is the yield times the property value, grown with appreciation and summed; the mortgage payment is the standard amortisation formula on a 30-year term; the balance is the amortised balance after the years you enter; the equity is the property value minus that balance. But the inputs carry the assumptions. The 10.2% stocks return is the S&P 500’s long-run nominal average — real 20-year stretches have come in well above and well below it. The 4.6% appreciation rate is a long-run national average: your city can run far hotter or far colder for a decade. The 3.0% net yield assumes the rent is collected, the property is occupied, and the maintenance bill is ordinary — a bad tenant or a new roof moves it. The mortgage is fixed at 6.5% for 30 years with no refinancing; a refinance at a lower rate cuts the payment and the negative cash flow, while a rate rise on an adjustable loan does the opposite. The calculator counts no buying or selling costs, no capital-gains tax, and no management fees, and it assumes the return is the same every year, so it shows the average outcome, not the path. The $131,254.89 negative cash flow is the single most important figure on this page: the leveraged win of $177,589.78 is real, but it is funded, not free. No studies or statistics are cited on this page beyond the two long-run averages named above, because none are needed: every figure is arithmetic on the numbers you enter.