REITs vs Direct Property Calculator

REITs vs direct property comparison factors leverage benefit. 100k cash: REITs at 8% total return = 216k after 10 years (no leverage). Direct property at 6% unleveraged but 4x leverage = ~24% effective return on equity = 858k after 10 years. Leverage transforms returns - if everything works.

Example: 100k cash. REIT at 8% over 10 years: 216k (116k gain). Direct property: 100k deposit on 400k house at 6% appreciation + 5% net yield = 11% gross unleveraged return. Leveraged 4x (only 25% deposit), effective return on equity ~24% (after debt service). Final: ~858k after 10 years - massively outperforms REIT due to leverage.

But leverage cuts both ways: 6% appreciation makes leverage golden; -3% appreciation amplified to -12% on equity, can wipe deposit. REITs steady, direct property volatile (great in up markets, terrible in down). Add to direct property: management hassles, tax complexity, illiquidity. Pure financial comparison favours leveraged direct property in steady-rising markets - but REITs win on convenience, diversification, and downside protection.

Quick example

With cash to invest of 100,000 and reit annual total return of 8% (plus property unleveraged return of 6% and property leverage multiplier of 4), the result is 643,550.05. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Cash to Invest, REIT Annual Total Return %, Property Unleveraged Return %, Property Leverage Multiplier, and Investment Period. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the option with the lower calculated total changes.

What's happening under the hood

REIT compounded at total return. Property compounded at leveraged return on equity. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Why investors run this

Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.