Quick answer
This calculator puts the same capital into two property strategies: a REIT investment compounding at a dividend yield plus appreciation, versus a leveraged physical rental. $100,000 in a REIT returning 9% a year in total becomes about $560,441 in 20 years. The same $100,000 as a 25% deposit on a $400,000 rental ends with about $807,128 — equity plus cash flow collected along the way — more, on these assumptions, in exchange for leverage, work and concentration in one building.
How the REIT vs Physical Yield works, step by step
Enter the capital available, the REIT's dividend yield and expected appreciation (which compound together), and for the physical property: the deposit percentage, rent, mortgage rate, appreciation and operating expenses. The calculator projects both positions to the same end date and names the winner on those assumptions.
The physical property's advantage is arithmetic, not magic: your $100,000 controls a $400,000 asset, so 4% appreciation is $16,000 in the first year alone — 16% on your money before costs. The mortgage payment and expenses eat most of the rent early on; the end position is mostly leveraged appreciation and forced principal repayment over two decades.
Read the physical model's assumptions before trusting its verdict. Rent grows 2% a year, tax and insurance are estimated at 1.5% of the purchase price a year, operating expenses are a percentage of rent, and the cash flow is accumulated rather than reinvested. On the default inputs the first month's cash flow is actually negative — about minus $89 — and only turns comfortable as rent grows.
The REIT's advantages do not fit in the projection: instant diversification across hundreds of properties, daily liquidity, no tenants, no maintenance, and no personal liability for a mortgage. The comparison answers 'which ends bigger on these assumptions' — the assumptions, especially physical appreciation and the absence of major repairs, deserve your scepticism.
Stress the appreciation input, because it decides the contest. At 0% property appreciation the physical position ends at about $330,679 — equity of about $237,989 plus the same cash flow — and the REIT wins by roughly $230,000. The leveraged path's edge is almost entirely a bet that the single property you picked appreciates at or above the rate you typed in.
The formula
REIT final value = Capital × (1 + dividend yield + appreciation)^years, with dividends reinvested. Physical end equity = appreciated value − remaining loan balance, where value = price × (1 + appreciation)^years and the balance follows the amortisation schedule; cumulative cash flow (rent growing 2% a year, less expenses, tax and insurance at 1.5% of price, less the mortgage payment) is added to show the full position.
Worked example — try it on the calculator above
Worked example: $100,000 over 20 years
REIT path: 4% dividend yield reinvested plus 5% appreciation is a 9% total return. $100,000 × 1.09^20 = $560,441. Physical path: $100,000 is 25% down on a $400,000 property; the $300,000 mortgage at 6% costs $1,798.65 a month. Rent starts at $3,400 and grows 2% a year; after expenses at 35% of rent, tax and insurance of $500 a month and the mortgage payment, cumulative cash flow over 20 years is about $92,690. At 4% appreciation the property is worth about $876,449 in 20 years and the loan balance has fallen to about $162,011, leaving equity of about $714,439. Physical ends at about $807,128 — ahead by roughly $247,000, driven almost entirely by leveraged appreciation, the input least in your control.
Frequently Asked Questions
How are REIT dividends taxed?
Most REIT dividends are taxed as ordinary income — REITs pass income through rather than paying corporate tax, and the dividends generally do not qualify for the lower capital gains rate — with a 20% deduction for qualified REIT dividends under Section 199A, now permanent. Holding REITs in an IRA or 401(k) shelters the income entirely, which is why they are commonly held in retirement accounts.
What total return have REITs actually delivered?
The FTSE Nareit All Equity REITs Index returned 8.94% a year over 25 years to September 2026 and 11.63% a year over 50 years, but only about 6.4% a year over the 10 years to May 2026 — and the path included a 24.9% fall in 2022 and a 41.3% rise in 2021. A planning assumption of 7% to 9% total return is more prudent than extrapolating the best decades.
What does the comparison leave out?
Your labour (a physical rental consumes real hours; valuing them at any wage narrows the gap), transaction costs of about 2% to buy and 6% to sell, major capital repairs, vacancy shocks, and the risk difference between one building and a diversified portfolio. It also ignores financing risk: the physical path can go underwater; the REIT path cannot go below zero. Taxes are ignored on both sides.
Can I get leverage inside a REIT investment too?
REITs themselves borrow — typical REIT balance sheets carry debt of roughly 30% to 50% of assets — so the equity return already includes moderate leverage beneath the surface. Margin borrowing on top of that to match a physical property's leverage is possible but dangerous: margin loans can be called in a falling market, which is exactly when REIT prices fall too.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.