Real estate and index funds build wealth in different ways: one through leverage, cash flow and principal paydown, the other through compounding and simplicity. This calculator projects both from the same starting capital over your chosen horizon, then compares ending wealth, contributions, profit, cash flow, appreciation, principal paydown, estimated taxes, after-tax wealth, inflation-adjusted wealth and annualized return — with a chart of estimated wealth over time.
What's included
- Side-by-side projection from the same starting capital
- Editable stock assumptions: contributions, return, dividend yield, taxes
- Editable real estate assumptions: leverage, rent, vacancy, expenses, appreciation, rent growth
- Real estate wealth split into cash flow, appreciation and principal paydown
- Estimated taxes, after-tax wealth and inflation-adjusted wealth
- Annualized return for both paths
- Wealth-over-time chart for the full horizon
Why the comparison is not apples to apples
A $60,000 index fund position and a $60,000 down payment control very different amounts of asset. Leverage is the main reason real estate projections often look larger — you are earning appreciation on $300,000 of property, not $60,000 of capital. Leverage also amplifies losses, adds debt service risk and requires management work that an index fund never does.
Where each path gets its return
Stocks compound in one line: price growth plus reinvested dividends, with no management and instant liquidity. Real estate returns come from four separate sources — cash flow, appreciation, principal paydown and tax treatment — and each carries its own assumptions. The table separates them so you can see whether a projection depends mainly on rent or mainly on hoped-for appreciation.
How to interpret your results
Change one assumption at a time. Drop appreciation from 3% to 1% and watch the real estate column; drop the stock return from 7% to 5% and watch the other. If a small change flips the winner, the honest conclusion is that the two paths are close and other factors — liquidity, effort, diversification, financing access — should decide. Taxes here are a simplified estimate; real treatment involves depreciation recapture, capital gains rules and possible 1031 exchanges.
Key formulas
Stocks (monthly compounding): Balance = Balance × (1 + annual return / 12) + monthly contribution Real Estate ending wealth: Sale Value = Purchase Price × (1 + appreciation)^years Equity = Sale Value - Remaining Loan Balance - Selling Costs Total = Equity + Cumulative Cash Flow Cash Flow (per year) = Rent × (1 + rent growth)^n × (1 - vacancy) - Expenses - Debt Service After-Tax Wealth = Ending Wealth - (Profit × tax rate) Inflation-Adjusted = After-Tax Wealth / (1 + inflation)^years Annualized Return = (Ending / Starting)^(1/years) - 1
Worked example: $60,000 of capital over 15 years
- Stocks: $60,000 initial plus $500/month at 7% annual return
- Total stock contributions: $60,000 + $90,000 = $150,000
- Real estate: $300,000 property, 20% down ($60,000) plus $6,000 closing and $4,000 repairs = $70,000 invested
- Rent $2,400/month growing 2.5% annually, 6% vacancy, $9,600 expenses growing with inflation
- Mortgage: $240,000 at 7% over 30 years = $1,596.73/month
- Appreciation 3% annually → value after 15 years about $467,400; selling costs 7%
- Real estate wealth = equity after loan balance and selling costs, plus cumulative cash flow
Both paths land in a broadly similar range under these assumptions — the outcome swings dramatically with the appreciation and stock return inputs, which is exactly why they are editable.
Frequently Asked Questions
Which builds wealth faster, stocks or real estate?
Neither wins universally. Leveraged real estate can outperform when rents and values grow and financing is favourable; index funds can outperform when property expenses, vacancy or flat appreciation drag returns. Both are assumption-dependent, and neither is guaranteed.
Does this calculator account for taxes?
It applies a simplified estimated tax rate to gains on each side. It does not model depreciation recapture, 1031 exchanges, tax-advantaged accounts or your marginal brackets. Speak with a qualified tax professional about your own situation.
Why does real estate often look better in the chart?
Mostly leverage: the projection applies appreciation to the entire property value while you invested only the down payment. Leverage magnifies losses in the same way, and the model assumes debt is serviced throughout.
What appreciation rate should I use?
Use a conservative figure and test alternatives. Long-run national home price growth has often been modest in real terms, and local markets vary widely. If the comparison only works at high appreciation, that is useful information.
Educational tool only — results are hypothetical projections from your assumptions, not financial, tax, legal or investment advice.