But what if I'd simply rented an apartment the whole time and then instead put the same amount of money into the Vanguard 500 index fund (VFINX)? If I had instead put the same amount of money into VFINX annually I'd have a return rate of 5.1%. The investment in my home has returned over double what I'd have gotten if I'd bought stock index fund instead.
Now lets look at our rental properties.
The first property was bought in 2001 for cash. Its had positive cash flow since then. All in that property has a IRR of 12.9% annually. During that period investing in VFINX would have given a 7% return.
The second rental we bought in 2006. For that one the IRR is 'only' 8%. Putting the same amount of money into VFINX would have given me about 4% IRR.
Here's a summary of how the 3 properties have performed versus if I'd just bought the VFINX index fund :
IRR | VFINX | |
Home | 11.5% | 5.1% |
1st rent | 12.9% | 7.0% |
2nd rent | 8.0% | 4.2% |
In total I've gotten 11.1% return from the house and rentals. If I'd bought VFINX then the total return would have been 5.3%.
Yes my real estate investments have paid off better than simply buying stocks.
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