Reader Case: Single Mom Wonders Whether Real Estate Beats Stocks

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While going through my reader case queue, this one caught my attention. This reader about to give birth and it immediately took me back to my labour and first months with Little Matchstick.

Wow, time flies. He’s already 6 months old but it somehow feels like it was just weeks ago that he was born, but also at the same time a whole decade. Time feels weird when you are a mom. Kind of like how time gets warped when you’re retired and travelling.

Anyway, I digress. I’m really interested in this reader case because not only is this reader going to be the mom of TWINs, she’s also doing it alone at age 42. Someone needs to give this woman a medal because having been through birth and taking care of a kid, I have so much respect for single moms. I have Wanderer to help me 24/7 and the ability to not work and yet it’s STILL hard. Kudos, reader, kudos.

So, without ado, let’s get into this reader case and hopefully take some of the load off this mom’s plate because I know how little time she’s going to have after the twins arrive and Mathing that Shit up may be the last thing on her mind for a while.  

Hi FireCracker,

I’m a 42 year old New Zealander, who’s about to have twins. (As in, within the next 2-4 weeks). I’m a single mum, and I’m interested in your thoughts on real estate vs. shares. 

I started in real estate 12 years ago, and NZ real estate has gone up quite a bit, so this has worked out for me so far. However, I’m really curious about how it would compare to selling some rentals and investing in the S&P 500 instead. 

Here’s where things are at: 


Shares in S&P 500 = $78,000

Kiwisaver (I think this is like 401k?) = $14,700

Cash Savings $61,000


As of right now, I earn $753.55 per week in rental income = $39,184 yearly. 

That’s post expenses, and doesn’t include 10% put aside for property maintenance, and also doesn’t include 20% I put aside for tax. 


Current monthly spending is around $2800. 


I own my own house (no mortgage) 

Rental property income – 4 properties:

Approx combined rental properties value: $1,190,000

My own house value approx: $450k


There’s $220k left on one of the rental property mortgages, the rest are all paid off. (I sold my most valuable property in 2021 to pay off the rest.)

Right now, the rental income is enough for me to live comfortably. 

I’m not sure whether this will hold true when the twins arrive (I suspect it won’t) however I’ve worked up until now as a freelance copywriter, so it’s possible I can build this business up again once the twins are a bit older (2-3 years) in order to supplement income. 

I’m curious – how does this income compare to selling the houses, investing in the S&P 500, and withdrawing as per the 4% rule? 

I’m not sure how the bond market works, or whether it’s possible to buy bonds in the US if you live in New Zealand, however, that’s another thing for me to consider (having read your book.) 

All the best,

Curious Kiwi

First of all, I have to say kudos for not only birthing twins for doing it as a single mom! You are very brave. As an older mother myself, my body hurts from carrying my son around all day, but I’m so grateful I waited to be financially set and healed from my childhood trauma before having kids because it has made all the difference. And from looking at your net worth and real estate holdings, it looks like you waited until you’re financially set as well!

That being said, real estate is less passive than ETFs. When it comes to needing things to be passive when you have a little crap-monster demanding your attention every second of the day, I’m grateful to not have to deal with broken toilets, leaky roofs or chasing after deadbeat tenants. I can barely manage this blog, never mind trying to manage multiple properties. So, I’m curious to see if the ROI on these properties are worth the extra work, which will inevitable by much more difficult now that CK has to be feeding her babies around the clock.

As we always say on this blog, let’s MATH THAT SHIT UP!


Rental Income (gross):$39,184/ yearly
Rental Income (net):$39,184 * 0.9 (maintenance) * 0.80 (taxes) = $28,212.48/year
Spending:$2800/month or $33,600
Investible Assets: $78,000 + $14,600 + $61,000 = $153,600
Properties:$1,190,000 (rental) +$450,000 (primary) = $1,640,000

In NZ, the real estate agent fee is 4% on the first $400K and 2% on the rest. However, since CK didn’t break down the value of each property, we’ll have to assume a worst-case across-the-board 4% fee when selling. This means that her rental properties would be approximately worth $1,190,000 – 4% = $1,142,400 after accounting for selling costs. Then after paying back the remaining mortgage of $220,000, she would net $922,400. She can redo this calculation with the actual prices broken down when she sells.

Given that her net rental income (after taxes and maintenance costs) is $28,212.48, this means her ROE (return on equity) is $28,212.48 / $922,400 = 3.06%, which is less than the 4% SWR on a diversified portfolio of stocks.

That being said, in the US and Canada, you can get the 4% yield tax-free after retirement because there’s a 0% tax bracket you can use when you’re below the standard deduction with $0 earned income in retirement. Plus, capitals and dividends are taxed more efficiently (to see how this works, reader our book). But in NZ, dividends are taxed similar to regular income. The difference is that the dividend tax rate caps out at 28% where as the top income bracket is 39%. Since the dividends she’s getting won’t reach the top dividend tax bracket, it’s just as tax inefficient as the rental income.

There’s also a rule called the “Brightline test” which states that if you own the property for less than 10 years, you’ll be subject to capital gains tax.

Disclaimer: I’m not an expert on New Zealand tax laws, so you should definitely double check with a local tax professional before selling your properties and/or buying shares.

So, even though moving to a portfolio would be more passive and provide more diversification, she has to be careful when she sells her properties to avoid paying massive capital gains taxes.

She could try a staged approach, where we sells the oldest property first, after it’s met the “brightline test” rules, put that into shares to reduce the amount of real-estate she has to manage and increase diversification.

Right now it seems like, after taxes, the income from the properties versus the yield from the portfolio is a bit of a wash and the only advantage comes in the form of less work and diversification from shares, but let’s let the numbers tell the story:

Given that she needs $2800/month or $33,600/year live on, her FI number is $33,600 x 25 = $840,000.

She has $153,600 in investible assets which generates $6144/year of passive income based on a SWR or 4%. Assuming no other income, dividends should be taxed at a rate of 10.5%. After taxes, that becomes $6144 – 10.5% = $5498.88. Add that to her current $28,212.48 net rental income, we get $33,711.36, which just barely covers her current living expenses.

If we were to sell her properties (following the “Brightline rule” to avoid capital gains taxes), her investible assets would go up to $922,400 + $153,600 = $1,076,000, giving her a yield of approximately $43,040. After taxes, that should yield $36,487.18 (again, this is just an estimate, please consult a tax professional). She is FI with some wiggle room, given her current spending of $2800/month.

That said, given that she now has to support 2 extra freeloaders precious gifts of life, which, in the first year would cost $250 USD/month each by my estimates (if she buys most things second hand and doesn’t need childcare), so that’s $411 NZ dollars/month each or $9864 NZ dollars for both kids. Her yearly expenses become $33,600 + $9864 = $43,464/year, which means she would be short $6976.82/year and will need to supplement with some freelance income. Or maybe she can rent out part of her house. She will need to recalculate her new expenses and FI number once she learns how much it costs to raise the twins.

Even though they’re taxed similarly, she’s still slightly ahead with the shares since she doesn’t have to put aside 10% annually on maintenance and a portfolio is much more passive, giving her the time to raise her twins. However, it makes sense to convert her real estate into shares gradually to avoid the massive capital gains hit. The other option is to increase rent to get a better ROE on her investments and improve her cashflow. But that still doesn’t help make it more passive or diversified. She bet hard on real estate and it’s work out for her in the past but maybe it’s time to take her foot off the gas, reduce the risk, and her workload. After all, those kids aren’t going to raise themselves.

Speaking of which, my freeloader is calling for his milk machine. Off I go…

What do you think? What would you do if you were CK? Would you sell the properties and invest instead? Raise rent? Pay off the mortgage? Let me know in the comments below.

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22 thoughts on “Reader Case: Single Mom Wonders Whether Real Estate Beats Stocks”

  1. I’m just wondering whether I misread how NZ posted her rental income and whether this would change anything. I had the impression from how it was written that her annual take home of $39,104 was her true net-that she’d already pulled of the 20% for taxes and the 10% for maintenance. I may be misreading this but if so, how would this change the numbers?

    1. Hi in NZ we have property rates (not property taxes) paid quarterly and then at the end of the financial year, the total rental income is calculated less expenses like rates, mortgage interest, maintenance, etc and the amount left would be taxed by the Inland Revenue as per their income tax bracket. Hope this clears it.

  2. Not sure if I read wrong, but it looked to me the $39,184/ yearly was net of maintenance and taxes; however, you subtracted them again in your calculation.

  3. For us, real estate helped us build a nest egg for retirement and we are well into retirement age. Real estate for blue collar, working class people who can do all their own work can be a good way to earn income. Originally we thought we would used the rentals as an income that grows with inflation. However managing and keeping up maintenance on rentals can be a lot of work and we have been gradually selling off our properties because we’d like to travel more.

    1. It’s comments like this that subtly disclose just how bad real estate is for investment purposes. If you’re considering buying real estate as an “investment” pay attention to the following.

      “Real estate for blue collar, working class people who can do all their own work can be a good way to earn income”
      “managing and keeping up maintenance on rentals can be a lot of work”
      “we have been gradually selling off our properties because we’d like to travel more”

      1) So you have to put work into this “investment”. Why not just work and invest in something that doesn’t require a massive amount of time and energy? You could have even had part time jobs to earn more without the time sink of real estate.
      2) Did you compare your return minus your expenses including paying yourself an hourly rate for all the work you did to simply buying an actual investment? i.e. Real estate appreciation vs. a portfolio of stocks and bonds (hint: stock and bond portfolio outperforms in the vast majority of cases).
      3) Now you have to offload the property so that you can pursue a more active life with travel. You probably could have done that throughout your life if you didn’t have the obligations of managing your investments.

      I have yet to see anyone who accurately accounts for their time and energy who is better off having owned real estate. For most people real estate is considered a “safe” investment and they backwards rationalize that they “did good” with it while ignoring their costs, especially the opportunity costs of their time. There are probably a few people who do really well because they are good real estate investors, but unless that is your specific skillset you likely underperformed but worked really hard for your underperformance.

      1. I was the full time caregiver for over 10 years for my mom who was ill until she died and I needed a flexible way to earn money. My husband was already working 12 hour night shifts as a machinist supervisor. That’s why we chose real estate investment but it’s not for the faint of heart. We actually did quite well due to having blue collar skills and working hard but you have to manage and keep on top of things. As working class people we didn’t know anything about investing in the stock market because we started before the internet was popular and never learned about investing. We have friends who are still working, who wish they sacrificed, and did what did. We have learned a lot from you younger folk and that’s why we are changing what we are doing. We plan to keep learning.

        1. You definitely sound like a decent hard-working family. Good job on increasing your knowledge when it comes to investing. There is a lot of misinformation out there. I also come from a working class background, and have had to educate myself on the intricacies of investments. It takes sacrifice whatever the course to reach financial goals.

          In the end people have to do what is best for them, but our system is set up to profit off uneducated people by using their own mental biases to make them think they are making good decisions when in fact they are simply profiting off of them. There are a lot of good books in that area. I just re-read two which I recommend: “Dollars and Sense” by Ariely; and “How to Think About Money” by Clements.

          1. Yup. You are right. Thanks. I do feel good that we took run down homes and made them into nice places for people to live which improved our neighborhood. I also am grateful that it allowed us to move out of that neighborhood in the last couple of years to a nicer one where police aren’t overloaded and can respond. We also don’t have to worry about car jackings, people stealing stuff out of our yard or trying to break into our garage and house. Thanks for the book recommendations. I love your book too. People can keep learning and changing all their life. A person just has to be open to new ideas and be willing to change. I love our ability to easily access a lot of different ideas and knowledge via the internet. You don’t even need to have a computer, smart phone or internet because you can go to the library and use their computers.

    1. I have never read Ben Carlson before. Quotes from that post:

      “The historical returns for stocks have crushed real estate returns while bonds and gold have done slightly better than owning a home.”

      9.8% stocks vs. 4.2% real estate. I agree with your statement. If we’re looking at an inflation hedge, which real estate is often thought of, we could have just owned bonds.

      “The 2020s have been an aberration for housing returns. Housing prices are already up nearly 50% in total just four years into the 2020s. That’s already better than the total returns for the entire decades of the 1990s, 2000s and 2010s.”

      Again, I agree with your statement. What that means is we’re more likely to experience lackluster gains moving forward. Not guaranteed, but probabilistically more likely.

      He then starts to go astray when he talks about how leverage makes real estate a much better investment. Then finishes up with some emotional justification for his purchase.

      “If I had to guess the actual returns on housing in America are probably closer to the stock market than the bond market because of the leverage involved. Housing prices mostly go up and rarely fall. Even a small steady return when you’re only putting 20% or less down can make for a wonderful return over the long haul… housing is far too circumstantial to put a number on it without making a ton of assumptions…I like to think of my house as more of a home than a financial asset…For most people, it’s a form of forced savings, which is even more important than the actual return.”

      Finishing up with the most telling quote:
      “Housing is the most emotional asset you can own.”

      Wow! This is a financial advisor… Where to start other than to say that he at least mentions that his justifications are emotional rather than logical.

      One of the biggest flaws with his logic: if leveraging small gains from real estate is a good idea, then leveraging the larger gains from stocks is a much better idea. If that’s too risky for you, then leverage a bond portfolio as they slightly outperformed real estate without all the maintenance and expenses (4.6% bonds vs. 4.2% real estate by his numbers).

      People giving financial advice should be held to presenting the information without going on to justify their poor decision making due to emotional reasons.

  4. I would gradually sell off my properties according to the “Brightline Rule”and negotiate a 1.5% commission with the real estate agents prior. Everything is negotiable. (The National Association of Realtors in the U.S. have to cut commissions after settlement with antitrust lawsuits. Check out this article and great podcast on the collusion and price fixing from Sam at Financial Samurai: I would then place the proceeds in a low cost Total Stock Market Index Fund or ETF equivalent. I would also house hack if I have additional rooms and option trade with a small account selling cash secured puts, covered calls and vertical spreads to make additional income from the premiums.

  5. The $39k was after setting aside money for vacancies and expenses. Also, that money “set aside” is not always used, in fact rarely always used. Add in appreciation and mortgage pay down (by the tenants, thank you very much), net worth will increase.

  6. Hello, I am a 40yr old single female nurse living in Auckland. I used to live on East Coast and owned 3 rental properties and my own home. I bought 1 property every year which needed work but had good bones, so I could negotiate a lower price for it and then do it up over a few weeks before being put on rent. Owning a NZ rental property means I can claim any maintenance, rates, insurance, mortgage interest and agent fees to name a few against my end of year tax bill thus I pay less tax. Cost of improving the property can not be claimed. Then I moved to Auckland City and I started selling a property every year starting with my own home as the bright line rules do not apply to it. By 2018 all my properties were sold, and I had doubled my money 50% of which I invested in ETFs (Superlife) and 50% used to buy a home and income needing work in Auckland in 2019. ETFs dividend income is taxed according to the total income you earn up to 28% max. Gains in share prices in ETF is considered long term so is not taxed but if you buy and sell individual shares are seen as short term and profits are taxed. Initially I had 30% NZ/Aus Dividends and 70% overseas ETFs incl SPX500 ETF returning avg 17% yearly but since my plan is to retire in 3-4 years, I am going to change to 20% Bonds, 30% Dividends and 50% overseas shares ETFs. Curious Kiwi if wishes to can keep 2 properties as inheritance for her twins so each will have a house as adults and sell 2 properties estimating for $550,000 less agent costs and invest in ETFs, 4% would be $22,000/yr plus rental income now halved to $19,592 totaling $41,592/yr. But these are only estimates, returns rely on Curious Kiwi’s portfolio allocation, taxes, returns etc so as stated above please take professional help before making any financial discissions. Congratulation on the Twins!

  7. The amount of work it took me recently to get a heat pump replaced for my condo was absurd. Phone calls, emails, quotes, arranging contractor visits. I can’t imagine doing that x4 with all those rental properties plus having young kids. I am childless and was working parttime and it was still tough to manage.

    So yeah, sell the properties as it makes sense tax wise and dump the cash into ETF’s. But it’s hard for the real estate folks to break free of their real estate only mindset.

  8. Hello, you did not take into account that the value of the properties could increase over the years so she may get way more money selling them in 20 or 30 years. How do you leverage that? also any thoughts regarding what’s going to happen tax wise when she will transfer her wealth to her kids, is it better to inheritate of stocks or real estate? thanks 🙂

    1. In NZ, inheritance tax does not apply if you inherit property but if you sell the property than taxes may apply. Individual shares are usually not directly transferrable unless specified in the will to 1 person. ETFs or where there are multiple people in the will usually get liquidated into cash which is than shared out once all costs and taxes are taken care of. I got a small inheritance from my aunt’s estate a few years ago and I made my will at same time but probate took almost a year and there was a dip in the market so I dont think her estate got top price for her portfolio.

  9. There’s a couple of things in the news in NZ recently which are also relevant, with the new government. (I am not a fan of the new government, but they are aiming to return a bunch of money to landlords and taking it from workers.)

    1. Brightline test is going to go to two years. Sounds like a great way to have less property speculation (not). But helps if one is considering selling property.
    2. Mortgage interest is going to be deductible as a rental cost again. Doesn’t help this case study because properties are paid off for the most part. Mortgages also are generally open in NZ (ie rates fluctuate often) than in Canada and especially than in the US, so having a mortgage does mean more uncertainty in general.

    There is also some complication with “foreign investment funds” tax in NZ. I think that if you hold, for instance, S&P 500, or other US funds, you may be taxed on the unrealized capital gains every year. Definitely don’t quote me on that, but also maybe look it up.

    A lot of the financial coverage in NZ doesn’t really know about low-cost index ETFs. It is possible to get them, e.g. through Sharesies, but definitely less common.

  10. This new Mother will probably get an extra approx $300nzd per week from the government because of her income. Also there is possibly ‘maybe’ an extra $120 until the babies first birthday.

  11. Rentals take time. That is a downside. But the analysis here fails to account for rental increases or appreciation. She can likely count on about 40k a year compounding in appreciation on the rental properties plus rents keeping up with inflation. The best that can be said for the stock portfolio is that she should not run out of money before she dies at a 4% withdrawal rate.

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