Buy-to-Let vs S&P 500

Why does the S&P 500 often beat property in this calculator?

The S&P 500 has delivered ~10%/yr nominal since 1957 with zero management effort, no vacancy, no maintenance, and lower transaction costs. Property benefits from leverage (mortgage) and tangible asset ownership, but acquisition costs (5–10%), ongoing expenses, and taxes erode returns significantly. The result depends heavily on local rental yields, appreciation, and your mortgage rate.

Does this account for leverage?

Yes. The property scenario uses your down payment + acquisition costs as the invested capital, with a mortgage covering the rest. The S&P 500 scenario invests the same initial capital without leverage. This is the most realistic comparison for a buy-to-let investor.

What is not included in this model?

The model does not include: rental income reinvestment (dividends reinvested in S&P 500 are included via compound growth), property management fees (~8–12% of rent), major renovation costs, or the psychological value of owning a tangible asset. It also assumes a single property purchase with no refinancing.

Is the S&P 500 return realistic?

The 10%/yr nominal return is the historical average since 1957. After inflation (~3%/yr), the real return is ~7%/yr. Past performance does not guarantee future results. You can adjust the return rate in the calculator to test different scenarios.