All Forum Posts by: Ryan Barnes

@Eric X. thanks for the response. I really appreciate it. If I understand you, you’re saying I’m not properly accounting the tax benefits (especially related to the depreciation)? —that is probably true, especially since the rival stock investing in this scenario would be had in a taxable account. I’m still learning a lot about tax law and strategy. 

But I’m not sure I know what you mean about the initial cash flow... the deal doesn’t exhibit strong cash flow in the beginning based on the way I‘d structure the lending. 

And your points on 10% sustained growth as overly aggressive are duly noted. I suppose it would be a pretty risky investment with timing difficulties and temptations. 

Because I'm factoring in the cost of interest paid to banks and I want to limit liability (debt) as much as possible. Personal income requirements are not strained by neutral CF during this period of time... the high cash flow will be happily usable in the later half of the investment period after liabilities are completely shrunk.

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.