This calculator compares two paths for the same cash: buy a rental and reinvest any positive cash flow, or invest the down payment elsewhere and cover any shortfall from that same alternative account. At national-median price and rent, financed at 6.71% with 2.9% rent growth against an illustrative 7% alternative return, the property reaches $101,849 in five years while the alternative reaches $132,100 — a $30,251 advantage for staying invested elsewhere, entirely because every year of this deal's cash flow was negative and had to be funded out of pocket rather than compounding.
How the comparison is built to be symmetric
The calculator runs the same year-by-year pro forma as the rental ROI tool, then splits each year's cash flow into two cases and treats both consistently at the same alternative rate of return. If a year's cash flow is positive, it is reinvested at your entered alternative rate from that year to the end of the hold. If a year's cash flow is negative, that shortfall is treated as money you would otherwise have put into the alternative investment — so it is added to the alternative side, compounding from that year forward too. Both paths compound at the identical rate — the only difference is which asset is holding the money in which year. That symmetry is what makes this a fair comparison of the true opportunity cost of the down payment, rather than a comparison that quietly favors one side.
At the end of the hold, the property side totals net sale proceeds plus all reinvested positive cash flow; the alternative side totals the original cash invested grown at the alternative rate, plus every funded shortfall grown at that same rate from when it was needed. The gap between the two is the advantage (or disadvantage) of buying, in dollars — and the calculator also reports each side's compound annual growth rate for a like-for-like percentage comparison.
Worked example — national medians against a 7% alternative
Same base inputs as the ROI calculator's worked example: $343,800 purchase price and $1,531 monthly rent (Census Bureau Q2 2026 medians), 25% down ($85,950 cash invested), 6.71% Freddie Mac rate, 7.3% Census vacancy, 2.9% BLS CPI rent growth, 0% appreciation, 0% expense inflation and selling costs (no verified figures), 5-year hold. The alternative return is the one number this calculator asks the user to supply directly — there is no verified national figure for "the return an alternative investment would earn," so this example uses an illustrative 7% purely to show the mechanics; substitute your own expectation.
As compound annual growth rates: the property path returns 3.45% a year on the $85,950 invested; the alternative path returns 8.98% — higher than the 7% input rate because it also captures the return earned on the out-of-pocket shortfalls the property would have required each year. This is the calculator's honest way of pricing what a negative-cash-flow property actually costs an investor beyond the sticker price of the down payment.
The one input that decides the comparison
The alternative return rate is the single input that moves this comparison the most, because it compounds on both sides of the ledger simultaneously — it is applied to the alternative investment's growth and to every dollar of property shortfall funded from that same source. A lower alternative rate (say 4%) narrows or can flip the gap in the worked example above; a higher one widens it further. Because no verified figure exists for what an alternative investment will actually return over a specific future hold period, this is the assumption most worth stress-testing across a realistic range rather than entering once and treating as settled.
The financing rate matters almost as much, for the same reason it dominates the plain cash-flow calculators: it sets the fixed debt service that determines whether any year's cash flow is positive (reinvested and compounding on the property side) or negative (funded and compounding on the alternative side instead). A lower rate can flip individual years from negative to positive, which changes which side of the ledger that year's dollars compound on — not just the year's cash-flow total.
What this comparison leaves out
- ·Taxes on either side. Neither the property's cash flow and sale proceeds nor the alternative investment's growth are adjusted for taxes. Depreciation specifically would improve the after-tax property case; see the rental depreciation calculator for that separate math under IRS Publication 527.
- ·Liquidity and volatility differences. A dollar in a diversified alternative investment and a dollar of home equity are not equally liquid or equally risky; this comparison treats both as certain compounding at the entered rate.
- ·Non-financial reasons to own. Control over the asset, forced savings discipline, and leverage on future purchasing power are real considerations this dollar-for-dollar model does not weigh.
Methodology
The worked example runs this calculator's own year-by-year comparison at the Census Bureau's Q2 2026 median asking sale price ($343,800) and median asking rent ($1,531), the same release's 7.3% national rental vacancy rate, the Freddie Mac PMMS 30-year rate for the week ending September 3, 2026 (6.71%), and the BLS CPI Rent of Primary Residence twelve-month rent-growth figure (2.9%) as the rent-growth input. The 7% alternative-return input is illustrative — no verified national figure exists for a specific future investment return — and is disclosed as such throughout.
Sources
- US Census Bureau — Housing Vacancy Survey, Q2 2026 — accessed 2026-09-07
- US Bureau of Labor Statistics — CPI News Release, Rent of Primary Residence — accessed 2026-09-07
- Freddie Mac — Primary Mortgage Market Survey — accessed 2026-09-07
- IRS — Publication 527, Residential Rental Property — accessed 2026-09-07