- LoanFunders.com Newsletter
- Posts
- Bricks vs. Bonds: How Rental Cash Flow Crushes 4 % Coupon Yields
Bricks vs. Bonds: How Rental Cash Flow Crushes 4 % Coupon Yields
George Tsividakis
May 16, 2025
Put the same dollars into a four-plex or a 10-year corporate bond—then watch which paycheck keeps up with inflation, builds equity, and actually grows over time.
1 | Fixed‐Income Comfort… or Cash-Flow Power?
Metric | Corporate / Treasury Bond (4 % Coupon) | Rental Real Estate (Bricks & Rent Checks) |
|---|---|---|
Initial Outlay | $100 K buys $100 K face value | $100 K = 20 % down on $500 K duplex |
Annual Income | $4,000 fixed | $7,200 net cash flow (after expenses) |
Inflation Hedge | None—coupon is fixed | Rents rise with CPI; loan payment fixed |
Equity Growth | Zero (face value only) | Principal pay-down + appreciation |
Tax Benefits | Interest taxed as ordinary income | Depreciation shelters rent; 1031 defers gains |
Leverage Factor | 1:1 (no leverage) | 5:1 (80 % LTV) |
Bottom Line: Bonds hand you a predictable—but shrinking—$333 per month.
A leveraged rental sends ~$600 per month plus equity build-up you’ll never see in a coupon.
2 | Running the Numbers—Same $100 K, Two Paths
Scenario A – 10-Year 4 % Bond
• Capital: $100,000
• Annual Coupon: $4,000 (taxed at ordinary rate)
• Principal Returned: $100 K at maturity (no growth if held to par)
• Total Cash Received 10 yrs: $40,000
Scenario B – 20 % Down on $500 K Duplex
Assumptions: 30-yr fixed @ 6 %, rents $4,000/mo, 38 % expense ratio.
Component | 10-Year Total |
|---|---|
Net Cash Flow | $7,200 × 10 = $72,000 |
Principal Paid | $45,000 |
3 % Appreciation | $172,000 |
Total Wealth Gain | $289,000 |
Return on $100 K: ≈ 289 % vs. 40 % for the bond.
3 | Why Bricks Beat Coupons
Leverage Multiplier – Your $100 K controls $500 K of asset value; every 3 % market uptick is $15 K to your equity.
Tenant-Funded Pay-Down – Each rent check slices away mortgage principal—you build wealth even in flat markets.
Inflation Protection – When CPI hits 6 %, a 4 % coupon loses real purchasing power. Rents generally rise; your fixed payment does not.
Tax Shields – Depreciation can wipe out taxable rental income, while bond interest is fully taxable.
Exit Flexibility – Refinance, cash-out, 1031-exchange, or hold forever. A bond’s face value is locked.
4 | Risks—And How to Tame Them
Bond Holder Risk | Rental Investor Counter-Risk |
|---|---|
Interest-rate moves ↓ bond price | Vacancy / repairs dent cash flow |
Issuer default | Market / tenant risk |
Inflation erodes real yield | Market downturn slows appreciation |
Mitigation Tactics for Rentals:
• Screen tenants, keep 6-month reserve, insure property.
• Lock long-term fixed debt.
• Choose markets with diverse employment and vacancy under 6 %.
5 | Financing Tools to Amplify “Brick” Yields (LoanFunders.com)
Goal | Product | Why It Wins vs. Bonds |
|---|---|---|
First duplex | DSCR Loan up to 80 % LTV | Qualify on rent, not personal DTI |
Rapid portfolio build | Bridge → DSCR Refi | Rehab, force appreciation, lock 30-yr rate |
Bundle 5+ doors | Portfolio Blanket Loan | One payment, easier estate planning |
Brokers can white-label each loan—earn fees while clients crush coupon yields.
6 | Conclusion—Trade Static for Dynamic
A 4 % bond feels safe—until you stack it next to rent checks, amortization, and appreciation. Real estate turns the same $100 K into an engine with three profit pistons, not one dripping coupon.
Ready to swap shrinking yields for expanding cash flow? LoanFunders.com is your leverage partner.
Build income that beats inflation—brick by brick.