Comparing IRR of real estate vs. other investment types

[Becca F.]

In an effort to see my properties (long-term rentals) are performing, I'm using Internal Rate of Return (IRR). I started comparing these to how my index funds and stocks are doing. I have a couple of REITs and other public market funds (Master Limited Partnerships and Business Development Companies.

Except for few blips like in 2022 and in few months ago, the S&P500 has done really well. I've had returns of tech index funds and stocks in the 15 to 20% range, with a few outliers of 24% over a 3 year period. These numbers don't seem sustainable over the long term. Hasn't the S&P500 had an average 11% return over 50 years? I'm using 8% to be on the conservative side and comparing it to my properties' IRR

I compared my Class A Indianapolis home - the IRR was 12% to 40% depending on which cost basis I used, the original purchase price in 2013 or the cash out refi amount in 2021. The lower number was around Year 1 to 4 then IRR went up at Year 5. This one was a bit muddled, not as straightforward as the Class C numbers since there was a cash out refi

For the Class C Indy home bought in 2023, my IRR was negative to 2% at Year 20 to at best 6% at Year 20. I used 3% appreciation and 3% rent increases for each year with $3600 for annual maintenance costs (my -$300 a month). Optimistically then I used $1500 for the annual maintenance costs, with the reasoning that this home should stabilize at some point, although I think there would be large cap ex the longer I keep it, needing new HVAC, roof, etc.

Here's the calculator I used (those are pre-populated numbers by the site owners, not mine):

https://www.calculator.net/rental-property-calculator.html

Anything missing with this calculator? Is there a better calculator I should be using? 

With index funds and stocks, I don't get tax benefits like rental expenses, depreciation, etc but the IRR is higher and what I'd consider more passive income and the exit strategy is much easier than exiting out of a bad property. I do have to pay taxes on this or any interest income from HYSA. The prevailing financial advice I've seen is buy 3 to 4 good index funds (e.g VOO, VTI) and just let it grow, maybe check it every few months, the "VOO and chill".

Also curious to hear from others as far as investment types: crypto, bitcoin, oil and gas, precious metals, I don't have a full understanding of crypto/bitcoin and have heard that it's volatile. Thoughts on the IRRs for those types of investments and how you feel they compare to RE (residential)? 

[Nicholas L.]

@Jules Aton

yes, i have properties that it's difficult to compare the "return" on, and i haven't tried.  for example, i've bought a few on seller finance that are great equity plays.  maybe ChatGPT could tell me?  =)

@V.G Jason

control and liquidity, right?  if I buy VTI: high liquidity, low control.  if i buy a single family a few miles away: low liquidity, high control (although, single families are actually pretty liquid these days.  you can't turn the equity into grocery money overnight but you can in a few months).  and then there are things like syndications: low liquidity, low control.