Buy this rental, or invest the cash?

How the model works

• Mortgage: a fixed-rate loan, paid monthly, principal and interest only.
• Rent: rises once a year by the rent-growth rate. Vacancy is entered as months per year and reduces rent evenly.
• Costs: property tax is a percentage of the home’s value, reset each year as the value grows. Insurance, maintenance, management, HOA and other expenses are percentages of rent.
• Appreciation: the home’s value grows at a constant rate, compounded monthly.
• Buying vs. investing: the market path is the same up-front cash (down payment, closing costs and repairs) left invested at a constant yield, compounded monthly. The buying path is the property’s equity plus the cash the property pays you each month, reinvested in the market at that same yield as it arrives. In a month when the property costs you money, you pay the shortfall out of pocket and the market path invests the same amount, so both paths put in the same cash and treat every dollar alike. The market balance can therefore never go below zero, and the buying line is never below equity.
• After the loan is repaid: there is no mortgage payment, while rent, costs and growth continue on the same assumptions. The chart runs for 40 years.
• Today’s dollars: when switched on, every amount is divided by the cumulative inflation to that date. All rates you enter are treated as nominal. This changes the size and shape of the curves, not who is ahead.
• Selling costs: excluded by default, so equity is shown as if you keep the property. When switched on, equity is shown after the selling cost you enter. The “how long to hold” analysis assumes 6% unless you set another value.

What is not included

• Taxes of any kind: income tax on rent, capital-gains tax and depreciation recapture on the property, and tax on market gains. Rules vary by country and by personal situation, so none are assumed on either side.
• Mortgage insurance, loan fees, refinancing, extra principal payments, major repairs beyond your reserve, special assessments and other unexpected costs.
• Risk and volatility: appreciation and market yield are smooth long-run averages. Real returns fluctuate and can be negative for years, and a single property is a concentrated, hard-to-sell investment.
• The time and effort of being a landlord.

Disclaimer

Brixyield is an educational planning tool. It is not financial, tax or legal advice. Results are estimates that depend entirely on the assumptions you enter, and the pre-filled example values are illustrative placeholders, not market data or a recommendation. Please consult a qualified professional before making a decision.