REIT vs rental property calculator
Compare a reinvested REIT return with one rental property estimate. Review ending values, invested amounts, property equity, and cumulative cash flow under your assumptions.
How it works
Enter the REIT dividend yield, REIT appreciation, and investment amount. Then enter the property price, down payment, monthly rent, vacancy, maintenance, property tax, mortgage rate and term, property appreciation, and projection years. Dollar amounts use USD.
Review the modeled ending values, capital entered, property equity, and cumulative property cash flow. The 10 year and 20 year comparisons use the selected projection length when it is shorter than the named period. They calculate that period directly rather than extrapolating from the final result.
Change one assumption at a time to see which estimate moves. A different starting amount can change the ending value comparison, so also consider each ending value relative to its own starting capital.
Use the comparison to inspect a defined set of assumptions. It does not select an investment or decide whether a particular property is suitable.
Step by step
- Enter the REIT and property assumptions
- Review amounts invested, ending values, equity, and cash flow
- Compare the modeled results with their limitations
Worked example
Example inputs: REIT investment $100,000, dividend yield 4% per year, and appreciation 3% per year. Property price $300,000, down payment 25%, monthly rent $2,400, vacancy 5%, maintenance 1% of property price per year, property tax 1.2% per year, mortgage rate 6.5% for 30 years, property appreciation 3% per year, and projection 10 years.
The estimate gives a REIT ending value of $196,715.14 and property ending value of $249,370.26. Property equity is $212,428.63 and cumulative property cash flow is $36,941.63. The starting amounts are $100,000 and $75,000. REIT distributions are reinvested, while property cash flow is added without reinvestment.
When to use this calculator
Use this calculator to compare a stated REIT return assumption with a rental property scenario using the inputs shown. It is useful for checking how rent, financing, costs, and appreciation affect a simplified projection.
Use the related calculators for a separate estimate of property income, cash on cash return, or after tax fund comparisons.
Common interpretation errors
Do not compare ending dollars without checking the starting amounts. A $100,000 REIT investment and a $75,000 property down payment are different capital inputs.
Do not treat fixed rent and expense assumptions as a forecast. Test lower rent, higher vacancy, larger costs, and different appreciation assumptions to understand sensitivity.
Formula and method
REIT ending value = REIT investment × (1 + (dividend yield + REIT appreciation) / 100)^years. Property value = property price × (1 + property appreciation / 100)^years. Monthly payment = amortizing payment on the original loan. Property equity = property value − remaining loan balance. Cumulative property cash flow = annual net operating income × years − monthly payment × months paid. Property ending value = equity + cumulative cash flow.
The calculator treats the REIT dividend yield and appreciation as one annual compound return, with distributions reinvested. Property rent, vacancy, maintenance, and tax assumptions remain fixed. Mortgage payments stop at the end of the entered term, even when the projection continues. Property cash flow is added without reinvestment.
Assumptions and limitations
This simplified estimate uses one constant annual REIT return made from the entered dividend yield and appreciation. It assumes distributions are reinvested. Property rent, vacancy, maintenance, and property tax bases stay fixed, and property cash flow is added without reinvestment. Mortgage payments stop after the selected loan term. The comparison omits purchase and sale costs, repairs beyond the maintenance input, insurance, management fees, financing fees, rent growth, tax effects, and changing market conditions. Starting REIT investment and property down payment are separate amounts and may not match. A higher ending dollar amount is not a risk adjusted recommendation or a complete return comparison.
Key terms
- Real estate investment trust
- A real estate investment trust is a company that owns or finances income producing real estate and whose shares may trade publicly.
- Net operating income
- Net operating income is modeled rent after vacancy, maintenance, and property tax, before mortgage payments.
- Property equity
- Property equity is the estimated property value minus the remaining mortgage balance.
Compare related calculations
Use this comparison to see how the assumptions differ between a publicly traded REIT investment and one rental property. The starting amounts can differ, so compare both the ending dollars and the capital entered.
For more detail, estimate rental income with the Cap Rate Calculator or compare listed real estate with a broad stock fund using the REIT vs ETF Tax Calculator.
FAQ
How does the calculator compare the two options?
The REIT value compounds the entered dividend yield plus appreciation each year. The property value compounds the entered property appreciation. Property equity is that value minus the remaining mortgage balance. Cumulative property cash flow is net operating income for each year minus mortgage payments made during the modeled period. The property ending value adds equity and cumulative cash flow. The calculation compares two separate starting amounts, so the higher ending value does not by itself show which use of capital has the higher return.
How does the property cash flow estimate work?
Annual net operating income is gross rent times 12 after vacancy, less maintenance and property tax calculated from the original property price. Annual cash flow then subtracts 12 mortgage payments, or fewer payments if the loan is paid off during the period. Rent and these expense bases stay constant throughout the estimate.
Are REIT dividends and property cash flow reinvested?
The REIT path assumes distributions are reinvested as part of its combined annual return. The property path adds rental cash flow to the ending amount without earning a return on that cash. The two treatments are assumptions in this simplified comparison.
How are mortgage payments treated?
Mortgage interest and principal are included through the monthly payment and remaining balance. Payments stop when the entered loan term ends. A zero mortgage rate uses equal monthly principal payments. A 100% down payment means there is no loan payment.
Which option is better?
There is no universal winner. Results depend on the inputs, and the starting REIT investment may differ from the property down payment. Compare the amounts invested, ending values, property equity, and cumulative cash flow. These estimates do not account for your full financial circumstances.
Related tools
The Cap Rate Calculator estimates property income relative to value. The Cash on Cash Return Calculator focuses on property cash flow relative to cash invested. The REIT vs ETF Tax Calculator compares simplified rental property and broad stock fund scenarios after estimated taxes.