Rental vs. Stocks ROI Question!

[Ryan Barnes]

I would LOVE to hear all of your investing perspectives and opinions on this... I have calculated the ROIs of a buying a rental property versus simply buying into the SP500 and sitting back for 30 years.

Rental Property Analysis:

Initial Cash investment - $45,000

Purchase price of $200,000 on 20 year term

Cash Flow neutral for loan term of 20 years.

Cash Flow positive for remaining 10 years. 

30 Year Approximate Net Profit = $110,000 Cash Flow + $300,000 Equity

ROI = ($410k / $45k) or 911%

Stock Market Analysis:

Initial Cash investment - $45,000

Purchase shares in SP500 Index Fund

30 Year Approximate Net Profit assuming 10% growth rate = $847,683

ROI = ($847,683 / $45k) or 1883%

Am I missing something? Does this all come down to the more philosophical and/or stress tolerance aspects of buying stock versus tangible property? Because it seems like from a strictly numerical approach the "better" strategy is to just buy stocks.

[Joe Villeneuve]

Yes you're missing something.  Why would you buy a property as a rental, and accept the first 20 years as cash flow neutral.