Real Estate vs Stock Investment Monte Carlo Simulator
Compare buying a home (with EMI, maintenance, and appreciation) versus renting and investing in stocks upto 20 years horizon.
Simulates rent growth, property appreciation, stock returns, and cash flow differences to estimate which strategy is more likely to win.
Total cost of the property you would buy in the "own" scenario.
Rent you would pay initially in the "rent + invest" scenario.
Average annual increase in rent. For example, 4 means rent grows 4% per year on average.
Standard deviation of annual rent growth. Higher values mean rent can accelerate or slow more unpredictably.
Average annual growth rate of property value. This reflects long-run housing market appreciation.
Standard deviation of annual property returns. Higher values mean property prices can swing more from year to year.
Monthly home loan payment in the "buy" scenario. Used to define your housing budget for comparing rent vs buy.
Ongoing maintenance, property taxes, and other ownership costs as a percentage of current property value per year.
Average annual return for your stock or index fund portfolio in the "rent + invest" scenario.
Standard deviation of annual stock returns. Higher values mean more volatile equity markets.
Longer horizons amplify compounding effects on both property and stocks.
Each simulation represents one possible future. More simulations provide smoother distributions but require more computation.
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How the Real Estate vs Stock Investment Monte Carlo Simulator Works
The Real Estate vs Stock Investment Monte Carlo Simulator is built to go beyond simple "rent vs buy" calculators that rely on a single fixed scenario. Instead of assuming one path for property prices, rent, and stock returns, it uses Monte Carlo simulation to generate many possible futures and then compares how often buying a home beats renting and investing the difference in stocks, and vice versa. This style of analysis is especially valuable in long horizons like 10, 15, or 20 years, where compounding, volatility, and sequence of returns risk can significantly change outcomes.
To use the simulator, you enter the property price, your starting monthly rent, expected rent growth and its volatility, assumed property appreciation and its volatility, your monthly EMI, an annual maintenance percentage, and assumptions for stock market returns and volatility. The model converts annual rates into monthly values and runs month-by-month simulations for the chosen horizon. In each simulation, the "buy" scenario tracks the property's value as it fluctuates with random appreciation. The "rent + invest" scenario tracks a stock portfolio that receives monthly contributions equal to the difference between the cost of owning (EMI + maintenance) and the rent, whenever that difference is positive.
At the end of every simulated path, the tool compares the final wealth from each strategy. For the buy option, wealth is represented by the property value; for the rent option, it is the size of the stock portfolio. The simulator records which strategy wins, and then aggregates results across all simulations to estimate the probability that real estate comes out ahead versus the probability that renting and investing wins. It also summarizes the distribution of final wealth for each approach and the distribution of the difference between them, providing insight into pessimistic, typical, and optimistic outcomes under the selected assumptions.
As with any financial model, it is important to recognize the simplifications involved. The simulator does not explicitly model loan amortization schedules, down payments, taxes, transaction costs, leverage effects, or personal income and savings behavior beyond a stylized housing budget. It assumes that any positive difference between owning costs and rent is consistently invested in a diversified stock portfolio and that returns follow a normal distribution around your chosen mean and volatility. Real-world decisions should consider these additional factors, along with personal preferences, flexibility needs, and risk tolerance. This tool is best used as an educational sandbox to explore how different assumptions can tilt the balance between buying a home and renting while investing in the market.
Real Estate vs Stock Investment – FAQ
What does this simulator compare, exactly?
The simulator compares two strategies: buying a property and benefiting from uncertain appreciation while paying EMI and maintenance, versus renting and investing the difference between ownership costs and rent into a volatile stock portfolio. It estimates which approach is more likely to lead to higher wealth at the end of a chosen horizon.
How does the model treat EMI and rent cash flows?
The model assumes that your housing budget is anchored by the "owning" cost: EMI plus maintenance. When renting, if rent is lower than this total, the difference is invested into stocks each month. If rent is higher than owning costs, the model assumes no investment contribution rather than borrowing to invest.
Does this tool account for taxes, loan principal, or down payments?
No. To keep the model focused and fast, it does not explicitly simulate loan amortization, down payments, tax deductions, transaction costs, or detailed cash flow accounting. It is a high-level Monte Carlo framework intended to explore the impact of rent growth, property appreciation, and stock returns on the relative attractiveness of buying versus renting.
Is this simulator giving me financial advice?
No. This simulator is for education and scenario exploration only. It can help you build intuition about the trade-offs between property and stock investing under uncertainty, but it does not know your full financial situation, goals, or constraints. For important housing and investment decisions, consider consulting qualified professionals and using multiple tools and perspectives.