Buy House or Invest in S&P 500
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
6
Taxes and Closing Fees
3
Home Purchase
Home Purchase Price
425000
House Down Payment
20
Loan Amount
$340,000.00
Loan Interest Rate
3
Loan Length in Years
30
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
1
This will be used to calculate your home tax
Effective Income Tax Rate
25
We will use this to calculate your loan interest tax deduction benefits.
Capital Gain Tax Rate
15
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 $855,296.30LESS THANS&P 500 investment.
$855,296.30
LESS THAN
Stock Market Stats
Final Investment account value:
$2,610,459.05
Stock Market Capital Gain Tax:
$391,568.86
Home Stats
Purchased on for sold on for
6/3/2002
$425,000
8/10/2022
$1,825,000
Selling the home proceeding: (deducting fees, and loan pay offs)
$1,515,992.81
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:
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
SPX 500
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