8% gross yield
- Input
- R$ 500 mil, 20 anos
- Expected output
- à vista 3,60 mi | financiado 2,95 mi
With a low yield, paying off wins.
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buy a home in cash or with a loan brazil
In the calculator, pick I have the full amount. It compares three paths from the same starting wealth: finance and invest what is left, pay cash, and rent while investing everything. Vary the yield to find the point where financing starts to pay off.
With a low yield, paying off wins.
The invested rent path is at 4.08 million.
The gap narrows but still favors cash.
Turning point: financing moves ahead.
It depends on two bets: how much the property appreciates and how much invested money earns. In an example with a R$ 500,000 property, R$ 100,000 down, a 30-year SAC loan at 11.5% a year, 5% appreciation, fixed income at 10% gross and rent adjusted 4.5% a year, buying and renting tie after 20 years when the starting rent is about R$ 2,972. With R$ 2,500 rent, renting and investing finishes ahead; with R$ 3,500, buying pulls ahead from year 5. That is why the tool shows a break-even rent and a sensitivity table instead of a single number.
Sometimes, and the calculator does not assume it. If the seller offers a cash discount, lower the property price in your own math for the cash path: a 5% discount on R$ 500,000 is R$ 25,000 in favor of cash.
Because income tax on fixed income cuts the gain, and the table is regressive from 22.5% to 15%. You pay loan interest in full. Compare the loan cost with the yield after tax.
The logic is the same: paying off earns, with certainty, the contract rate. Compare that rate, insurance included, with what the money would earn after tax. Extra repayment under SAC cuts the balance and future interest.
After 20 years, Rent and invest finishes ahead of Buy with a loan by R$2,366,901 in net worth.
With these assumptions, buying does not overtake renting and investing within 20 years.
Assumptions: property appreciates 4.7% a year, fixed income yields 14.8% gross a year, rent of R$2,500 adjusted 4.7% a year, loan at 11.5% a year.
R$6,707,583
R$6,316,589
R$9,074,484
Break-even rent: the starting rent at which buying and renting end equal. Break-even appreciation: the yearly appreciation at which that happens, other assumptions unchanged.
| Appreciation \ yield | 10.8% | 12.8% | 14.8% | 16.8% | 18.8% |
|---|---|---|---|---|---|
| 0.7% | -R$812.8K | -R$1.8M | -R$2.9M | -R$4.2M | -R$5.9M |
| 2.7% | -R$584.9K | -R$1.6M | -R$2.7M | -R$4.0M | -R$5.8M |
| 4.7% | -R$244.4K | -R$1.3M | -R$2.4M | -R$3.7M | -R$5.5M |
| 6.7% | +R$256.9K | -R$776.9K | -R$1.9M | -R$3.2M | -R$5.1M |
| 8.7% | +R$986.4K | -R$59.7K | -R$1.2M | -R$2.6M | -R$4.4M |
Positive (green): buying finishes ahead. Negative (amber): renting and investing finishes ahead. The outlined cell is your scenario.
| Year | Buy with a loan | Buy in cash | Rent and invest | Property value | Loan balance |
|---|---|---|---|---|---|
| 0 | R$500,000 | R$500,000 | R$522,500 | R$500,000 | R$400,000 |
| 1 | R$584,193 | R$587,673 | R$622,358 | R$523,500 | R$386,667 |
| 2 | R$679,679 | R$682,870 | R$737,428 | R$548,104 | R$373,333 |
| 3 | R$788,270 | R$787,095 | R$870,574 | R$573,865 | R$360,000 |
| 4 | R$904,707 | R$901,268 | R$1,015,014 | R$600,837 | R$346,667 |
| 5 | R$1,033,679 | R$1,026,725 | R$1,177,158 | R$629,076 | R$333,333 |
| 6 | R$1,176,913 | R$1,165,047 | R$1,359,627 | R$658,643 | R$320,000 |
| 7 | R$1,336,386 | R$1,318,039 | R$1,565,425 | R$689,599 | R$306,667 |
| 8 | R$1,514,362 | R$1,487,767 | R$1,798,000 | R$722,010 | R$293,333 |
| 9 | R$1,713,431 | R$1,676,598 | R$2,061,310 | R$755,945 | R$280,000 |
| 10 | R$1,936,562 | R$1,887,242 | R$2,359,895 | R$791,474 | R$266,667 |
| 11 | R$2,187,154 | R$2,122,801 | R$2,698,967 | R$828,674 | R$253,333 |
| 12 | R$2,469,104 | R$2,386,832 | R$3,084,503 | R$867,621 | R$240,000 |
| 13 | R$2,787,623 | R$2,684,156 | R$3,524,116 | R$908,399 | R$226,667 |
| 14 | R$3,150,921 | R$3,022,532 | R$4,028,772 | R$951,094 | R$213,333 |
| 15 | R$3,565,448 | R$3,407,898 | R$4,608,097 | R$995,796 | R$200,000 |
| 16 | R$4,038,626 | R$3,847,082 | R$5,273,161 | R$1,042,598 | R$186,667 |
| 17 | R$4,578,947 | R$4,347,901 | R$6,036,654 | R$1,091,600 | R$173,333 |
| 18 | R$5,196,155 | R$4,919,317 | R$6,913,144 | R$1,142,905 | R$160,000 |
| 19 | R$5,901,426 | R$5,571,614 | R$7,919,355 | R$1,196,622 | R$146,667 |
| 20 | R$6,707,583 | R$6,316,589 | R$9,074,484 | R$1,252,863 | R$133,333 |
Simulation with editable assumptions, not investment advice. It leaves out capital gains tax, vacancy, FGTS and home insurance.