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Buy House or Invest in S&P 500

Picture this: a crystal ball that, instead of predicting your future, enables you to peer into an alternative financial past. A past where, instead of signing a mortgage and picking out curtains, you opted to sink your savings into the S&P 500. This crystal ball, in reality, is a smartly-designed calculator. The catch, you ask? It can only weave its magic on past events, simply because it's bound by the historical performance of the S&P 500 and cannot foresee future property values or stock market trends.

This clever device takes into account a myriad of factors associated with homeownership, such as maintenance costs, taxes, insurance premiums, loan payments, and tax deductions. It then whisks these ingredients together to cook up an estimate of the potential long-term profits from selling a house, comparing this to what you might have reaped had you invested in the S&P 500.

But the fun doesn't stop there! This handy tool can also be wielded to assess any house sold in the market, helping you uncover whether the seller might have been better off investing in the S&P 500. In this grand theatre of financial decisions, the question remains: to buy or not to buy? Let this magical calculator illuminate the path that could have been!

Home Sold

Sell Date

8/10/2022

⁠

Sell Price

1825000

⁠

Agents Commission

⁠

Taxes and Closing Fees

⁠

Home Purchase

Home Purchase Price

425000

⁠

House Down Payment

⁠

Loan Amount

$340,000.00

⁠

Loan Interest Rate

⁠

Loan Length in Years

⁠

Purchase Date

6/3/2002

⁠

Maintenance / Remodeling

House Maintenance yearly cost

1.5

⁠

A common rule of thumb is to budget 1-2% of the home's value each year for ongoing maintenance and repairs.

Remodeling

Total Remodeling cost

100000

⁠

We will spread this cost across all years of owning the home.

Taxes & Insurance

Insurance Cost

0.15

⁠

A common rule of thumb is that the average cost of homeowners insurance in the United States is typically around 0.1% to 0.3% of the home's value per year.

City Tax Rate

⁠

This will be used to calculate your home tax

Effective Income Tax Rate

⁠

We will use this to calculate your loan interest tax deduction benefits.

Capital Gain Tax Rate

⁠

Was this the primary home and you stay there 3 out of the last 5 years.

For single taxpayers, you may exclude up to $250,000 of the capital gains, and for married taxpayers filing jointly, you may exclude up to $500,000 of the capital gains

⁠

Are you married?

Results

Net proceeding from house:

$1,363,593.89

⁠

Net proceeding from Stock Market:

$2,218,890.19

⁠

Seller made
`$855,296.30`
⁠
⁠
`LESS THAN`
⁠
S&P 500 investment.

Stock Market Stats

Final Investment account value:

$2,610,459.05

⁠

Stock Market Capital Gain Tax:

$391,568.86

⁠

Home Stats

Purchased on

6/3/2002

⁠

for

$425,000

⁠

sold on

8/10/2022

⁠

for

$1,825,000

⁠

Selling the home proceeding:

$1,515,992.81

⁠

(deducting fees, and loan pay offs)

Selling home commission/fees:

$164,250

⁠

Selling home Capital Gain Tax:

$152,398.92

⁠

Home Loan Interest:

$152,976.19

⁠

Home Taxes:

$194,682.55

⁠

Home Insurance:

$29,202.38

⁠

Home Maintenance:

$292,023.82

⁠

Home Remodeling:

$100,000

⁠

Home Tax Deduction Benefits:

$38,244.40

⁠

How are we making the calculation:

If you have a loan then all the monthly payments will be invested in S&P 500 on the same month

We invest in S&P 500 based on house maintenance cost, insurance, taxes, remodeling

We invest all the down payment in s&p 500

We use the price of s&p 500 on first day of each month for calculation

We calculate the benefits you can get from deducting home interest from your taxes

We consider the capital gain tax deduction you can get from home sale

Home Value vs S&P 500

Home Value vs S&P 500

⁠

Parameters

Down Payment:

$85,000.00

⁠

Monthly Interest:

0.0025

⁠

Loan Term In Month

360

⁠

Monthly Payment:

$1,433.00

⁠

Buy/Sell Months:

243

⁠

Home Value Gain Percent:

0.006039844837118169

⁠

Unpaid Loan Amount:

$144,757.19

⁠

Home Cost Breakdown

Home Cost Breakdown

⁠

SPX 500

SPX 500

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