Rental Property vs. Equity Calculator

This ratio (annual rent ÷ purchase price) is the single most important metric for rental property investing. It tells you what gross yield you're getting on the property before expenses.

Below 4%: Very difficult to cash flow. Betting on appreciation.
4-6%: Marginal. May work with low expenses.
Above 6%: Generally favorable for rental investing.

Short term (5-7 years): Real estate's 6-8% selling costs hurt. Equity's liquidity advantage is significant.

Long term (15+ years): Mortgage paydown builds equity. Leverage has more time to work. But you're also a landlord for decades—consider the lifestyle factor.

With a 20% down payment, you're using 5x leverage. If the property appreciates 2%, your equity grows 10%. But if it drops 2%, you lose 10% of your down payment.

Equity investing without leverage is less exciting but also less risky—and requires no tenants, repairs, or midnight phone calls.

• Transaction costs: Real estate costs 6-8% to sell; stocks are nearly free
• Taxes: Depreciation helps rentals; capital gains affect stocks
• Your time: Being a landlord is work; index funds are passive
• Concentration risk: One property vs. global diversification