Real Estate
Building wealth through property - rental income, appreciation, and everything in between.
Real Estate by the Numbers
A few figures worth knowing before you buy. National averages hide big local differences.
Roughly the national average since 1987 (S&P CoreLogic Case-Shiller index), before inflation. That's price growth alone - it doesn't include rent a property could earn.
National home prices fell about 27% from peak to bottom and took roughly a decade to fully recover. Some local markets fell far more. Home prices can and do go down.
About two in three U.S. households own their home (U.S. Census Bureau). For most of them, it's the largest single asset they own.
Agent commissions, closing costs, and prep or repairs, as a share of the sale price. Buying adds another 2-5% in closing costs. Round-trip costs like these are why short stays rarely pay off.
A common rule of thumb for upkeep, as a share of the home's value. On a $400,000 home, that's $4,000-$8,000 a year - roofs, water heaters, and HVAC systems all wear out eventually.
Profit from selling your primary home is tax-free up to $250,000 (single) or $500,000 (married filing jointly), as long as you owned and lived in it for 2 of the last 5 years. Rental properties don't get this break.
Core Concepts
How property makes money, and what can go wrong.
Four ways property makes money
Appreciation (the value rises), cash flow (rent left over after all expenses), loan paydown (tenants' rent pays down your mortgage, building equity), and tax benefits (like depreciation on rentals). Your own home only gets the first and third, plus the rent you no longer pay.
Leverage cuts both ways
A mortgage lets you control a large asset with a small down payment. Put 20% down on a $400,000 home and a 10% price rise ($40,000) doubles your $80,000 stake to about $120,000 in equity - but a 10% drop wipes out half of it. That's before any buying and selling costs.
It's local
Prices are driven by local jobs, population growth, and how much new housing gets built. One metro can boom while another an hour away stays flat for years. National averages are a starting point, not a forecast for your street.
Interest rates move prices
Lower mortgage rates let buyers afford more for the same monthly payment, which tends to push prices up. Higher rates cool demand. On a $320,000 30-year loan, going from 5% to 7% raises the principal-and-interest payment by roughly $410 a month.
It's illiquid and hands-on
Selling can take weeks or months and costs thousands. Owning a rental means dealing with tenants, repairs, and vacancies - or paying a property manager (often 8-12% of the rent) to do it for you.
Think in decades
Over long periods U.S. home prices have trended upward despite serious downturns. Like stocks, real estate rewards patience far more than trying to time the market - and buying and selling costs punish frequent moves.
Ways to Invest in Real Estate
From buying one share of a fund to owning buildings outright. Sorted roughly from least to most hands-on.
| Option | How it works | Money needed | Effort | Can you sell quickly? |
|---|---|---|---|---|
| REIT ETFs and funds | A fund holding many publicly traded REITs - companies that own apartments, warehouses, offices, data centers, and more. Vanguard Real Estate ETF (VNQ, 0.13% expense ratio) is a common example. | Price of one share, or less with fractional shares | None | Yes, any trading day |
| Individual REIT stocks | Buy shares of a single REIT through a brokerage. REITs must pay out at least 90% of their taxable income as dividends. | Price of one share | Low | Yes, any trading day |
| Crowdfunding platforms | Online platforms pool money from many investors into properties or private real estate funds. Some are open to everyone; others require you to be an "accredited investor". | Often $10-$5,000+ | Low | Often no - money can be locked up for years, and fees are higher than REIT ETFs |
| Your own home | Build equity through appreciation and mortgage paydown instead of paying rent. See Rent vs Home Owner to run the numbers. | Down payment (0-20%) plus 2-5% closing costs | Medium | No - weeks to months, with 6-10% selling costs |
| House hacking | Buy a 2-4 unit property (or a home with a spare unit or rooms), live in one part, and rent out the rest. Lets you use owner-occupant loans with smaller down payments. | Owner-occupant down payment (as low as 0-5%) | Medium | No |
| Long-term rental | Buy a property and rent it out on yearly leases. Income from rent; you handle (or hire out) tenants and repairs. | Usually 15-25% down for an investment loan | High | No |
| Short-term rental | Rent nightly or weekly on platforms like Airbnb or Vrbo. Higher potential income, but more work, furnishing costs, and local rules that can restrict or ban it. | Down payment plus furnishing | High | No |
| Fix and flip | Buy a property that needs work, renovate it, and sell for a profit. Profits are taxed as regular income, and delays or budget overruns can erase them. | Purchase plus renovation budget | Very high | Selling is the plan, but timing isn't guaranteed |
Where to Buy Property
Most homes are found through an agent and the MLS, but it's not the only route.
Through an agent (the MLS)
The Multiple Listing Service is the database agents use to list homes for sale, and it feeds sites like Zillow, Redfin, and Realtor.com. A buyer's agent helps you tour, bid, and negotiate. Since 2024, buyers sign a written agreement with their agent that spells out how the agent is paid.
For sale by owner (FSBO)
The owner sells without a listing agent. There may be room to negotiate, but you'll handle more yourself - a real estate attorney to review the contract is a good idea.
New construction
Buy directly from a builder. You get a new home and often a builder warranty, and builders sometimes offer rate buydowns or closing-cost help. The builder's sales agent works for the builder, so consider bringing your own agent.
Foreclosures and bank-owned homes
Homes taken back by lenders, sold through listings or government programs like HUD Homes and Fannie Mae's HomePath. Often priced below market, but usually sold as-is and may need significant repairs.
Auctions
Foreclosure and tax-lien auctions, in person or online. Potential bargains, but you often can't inspect inside, may need cash or proof of funds on the spot, and could inherit liens or occupants. Best left to experienced buyers.
Brokerage account (REITs)
The same brokerage you'd use for stocks can buy REIT stocks and REIT ETFs - real estate exposure without a mortgage, tenants, or closing costs. See the Stocks page for how ETFs work.
How Financing Works
Most buyers need a mortgage. The loan type sets the minimum down payment and who qualifies.
| Loan | Minimum down | Best for | Worth knowing |
|---|---|---|---|
| Conventional | 3% (first-time buyers); 5% typical | Buyers with good credit | Under 20% down requires PMI, which you can cancel once you reach 20% equity. |
| FHA | 3.5% (580+ credit score) | Lower credit scores or small down payments | Mortgage insurance usually lasts the life of the loan unless you put 10%+ down; refinancing is the common way out. |
| VA | 0% | Eligible veterans, service members, and some spouses | No monthly mortgage insurance; a one-time funding fee applies unless exempt. |
| USDA | 0% | Eligible rural and some suburban areas, with income limits | Check the USDA eligibility map - more areas qualify than people expect. |
| Investment property | Usually 15-25% | Rentals you won't live in | Higher rates than owner-occupied loans. Living in a 2-4 unit property yourself (house hacking) can qualify for owner-occupant terms instead. |
Get pre-approved first
A lender reviews your income, debts, and credit and tells you how much they'll lend. Sellers take pre-approved offers more seriously, and it keeps you shopping in the right price range.
Shop multiple lenders
Rates and fees vary between lenders for the same borrower. Compare Loan Estimates from at least three. Multiple mortgage credit checks within a short window generally count as a single inquiry on your score.
15-year vs 30-year
A 15-year loan has a higher monthly payment but a lower rate and far less total interest. A 30-year loan keeps payments flexible - you can always pay extra to finish early.
Key Terms
The words you'll see when buying a home or evaluating a rental.
Buying a home
- Equity
- What you'd own outright if you sold: the home's value minus what you still owe on the mortgage.
- PITI
- Principal, interest, taxes, and insurance - the four parts of a typical monthly mortgage payment. HOA dues and PMI come on top.
- PMI (private mortgage insurance)
- Insurance that protects the lender, required on conventional loans with less than 20% down. You can ask to cancel it at 20% equity, and it ends automatically at 22% based on the original value.
- Escrow
- An account your lender uses to collect property tax and insurance with your monthly payment and pay those bills for you. Also the neutral holding period between an accepted offer and closing.
- Closing costs
- Fees paid when you finalize the purchase: lender fees, appraisal, title insurance, and more. Usually 2-5% of the loan or price.
- Points
- Optional upfront fees (1 point = 1% of the loan) paid to lower your interest rate. Only worth it if you'll keep the loan long enough for the monthly savings to cover the cost.
- APR (annual percentage rate)
- The loan's yearly cost including interest plus most lender fees and points, so it's usually a bit higher than the interest rate. Compare APRs, not just rates, when shopping lenders.
Evaluating a rental
- NOI (net operating income)
- Yearly rent minus operating expenses (taxes, insurance, repairs, management, vacancy) - before mortgage payments.
- Cap rate
- NOI ÷ purchase price. A $300,000 property with $18,000 NOI has a 6% cap rate. Useful for comparing properties regardless of how they're financed.
- Cash flow
- What's left each month after every expense, including the mortgage. Negative cash flow means you're paying to own it.
- Cash-on-cash return
- Yearly cash flow ÷ the cash you put in (down payment, closing costs, repairs). $6,000 a year on $75,000 invested is 8%.
- 1% rule
- A quick screen: monthly rent should be about 1% of the purchase price ($2,000 rent on a $200,000 home). Hard to hit in many markets today, and never a substitute for running real numbers.
- Depreciation
- A tax deduction that lets rental owners write off the building's cost (not the land) over 27.5 years for residential property, lowering taxable rental income. It's partly taxed back ("recaptured") when you sell.
- 1031 exchange
- Selling an investment property and buying another "like-kind" one within strict deadlines to defer capital gains tax. Doesn't apply to your primary home.
Calculators
Home Loan
The interest rate starts at the Freddie Mac Primary Mortgage Market Survey® 30-year fixed average (7.32% as of October 22, 2026) - your own rate depends on your credit and down payment. Property tax auto-fills with your state's average effective rate; home insurance uses a national average starting point. Both vary by county/insurer, so adjust to match your area. This tool gives estimates for planning, not a formal loan offer.
Enter your numbers and hit Calculate to see your payment breakdown.
Home Prices
Home values are the median value of owner-occupied homes from the U.S. Census Bureau's American Community Survey - what owners estimate their homes are worth, not recent sale prices, so they can trail a fast-moving market. States use yearly estimates and show a trend; ZIP codes use 5-year averages (more reliable for small areas), so they have no trend line. Very small ZIP codes, and ZIPs that are only P.O. boxes, have no estimate.
Pick a state or enter a ZIP code to see the median home value.
What this comparison actually covers
This compares housing values (U.S. Census Bureau, real data) and, when comparing by state, tax rates (property & sales tax, sourced from ATTOM/Bankrate and the Tax Foundation) - the categories we have real, verifiable numbers for. We're not showing a full "cost of living" figure with groceries, utilities, healthcare, or transportation: the well-known source for that (Numbeo) now charges $260/month, and most of what's marketed as free ZIP-level cost-of-living data elsewhere is unsourced. We'd rather compare less, accurately, than more, inaccurately.