Sell my primary capturing the equity and investing that money in the stock market

[Patrick Thomas Dickinson]

Hello Everyone 

Im writing this post to see if theres any thing im missing in my thought process. Im always interested in hearing someone elses viewpoint. I have heard time and time again that a primary residence is not considered a good investment if you really look at the numbers. So I ran my numbers and I will discuss below. 

My current primary ( scenario 1) Keep the primary for the life of the loan ( current rate is 4.5 so i dont see my self refinancing anytime soon)

current home value 1,150,000

Loan amount 935,000

appreciation estimate 5% per year 

after a 28 year hold and the house is paid off I would have a house worth 4,312,000$

my current mortgage is 6125$ ( piti) included 

My second option( scenario 2) 

Sell the house, walk away with $150 ,000 ish in hand and put that into a low cost index fund 

Rent a house elsewhere for about 3000$ ish and take the extra 3000$ im saving everymonths from not having to pay my mortgage and puting that money in the index fund as well 

I ran the numbers on both of these scenarios and doing what I mentioned above would break even at about 28 years meaning my stock account would be worth 4.3 million just like my house would , but the only is that holding a house for 28 year would mean 28 years of property taxes, loan interest ,home insurance and repairs etc whick I calculated to be about 1,200,000$ at minimum which raised my eyebrows to say the least 

Also i understand that each of these options ( stock market vs real estate ) will have there tax consequences ( long term capital gains) so any thoughts on that would be appreciated as well. 
 

What would you do? It seems like selling and renting is the biggest wealth builder in the end 

Rent in a lower cost area with a lower monthly payment and use the difference gained  to invest in the stock market ( which would yield around 8 percent) 

Keep the primary and hold it long term ( average appreciation in california from what I could see is about 5 to 6 percent if you look back in time 

Keep it as long term rental ,it would rent for $3800 current mortgage is 6150 $ - doesnt seem smart to me 

Let me know if you need any more details in order for you to give me a better answer or insights 

[Nathan Gesner]

Quote from @Patrick Thomas Dickinson:

You fail to consider a few things:

1. Rent income for 28 years. Even if it remains steady at $6,000 per month, you will earn over $2 million in 28 years. The truth is that the rent rates will likely triple during that time and you will earn closer to $4 million of a 28-year period. How much income will you receive from your stock portfolio during that time of growth?

2. Expenses (taxes, insurance, repairs, etc.). Yes, there will be expenses, but they are paid for by your rent income, which really means you are reducing the amount of income. It's still positive income and not a true expense out of your pocket.

3. Tax benefits. My investments earn me about $200,000 a year, which is money in my pocket. Yet, because of the deductions, I pay almost nothing in taxes.

4. Accessing money from the stock market is expensive, whereas you can access the money from your real estate by collecting rent, cashing out equity, a line of credit, selling and investing in multiple properties, etc.

I have a relative who has over $2 million in the stock market. It took him 40 years to accumulate that wealth. His annual dividends are around $40,000. He just turned 84 and he's afraid to take any money out of the market because of the tax hits.

Meanwhile, I built a $3 million real estate portfolio over the last 12 years and earn four times what he does every year.

Not all investments are equal.