Dollar Cost Average Calculator: How to Use It For Real Estate

The Big Picture On Using A Dollar Cost Average Calculator:

• • Dollar Cost Averaging (DCA) involves investing a fixed amount regularly, regardless of market conditions, to mitigate the risks of market volatility. While commonly associated with stocks, DCA can also be applied to real estate investments.
  • Our free DCA calculator to help investors visualize potential growth from regular investments. This tool allows users to input their investment amounts and frequency, offering projections of how their real estate portfolio could appreciate over time.
  • Diversification is a crucial component of a successful DCA strategy in real estate. By spreading investments across various real estate assets—such as publicly-traded REITs, real estate crowdfunding platforms, and fractional ownership in rental properties—investors can reduce risk and enhance potential returns.

I like the idea of steadily investing monthly in real estate, but I don’t know how.

Many investors (myself included) use dollar cost averaging to invest in stocks. Buying shares in an ETF for $50-100 is easy. That’s much harder to do with assets costing hundreds of thousands.

However, you can still use a dollar-cost average for your real estate investments, even if you only have $10 or $100 each month to invest. We created a free dollar-cost averaging calculator to demonstrate how quickly you can grow your wealth with regular investments.

What Is Dollar Cost Averaging?

Dollar cost averaging means investing the same amount in an asset regularly, such as weekly, biweekly, monthly, or even daily.

For example, you could invest $100 every week in SPY, an exchange-traded fund (ETF) that mimics the S&P 500. I invest weekly money with a robo-advisor (I use Schwab; it’s free) that spreads my money across U.S. and international stocks in all sectors and market caps.

The idea is simple: by investing on a regular schedule, your portfolio will perform just like the overall assets you’re investing in. Think of it as the opposite of trying to time the market — you instead aim to mirror the market’s returns.

Sound boring? Most good investing advice is boring. Don’t pick and choose individual stocks, don’t day trade, and don’t try to time the market. Much smarter and better-informed investors always get it wrong, so why do you think you can beat them? It’s pure hubris.

Core Elements of This Investment Strategy

Sound complicated? Nope, here’s what you need to know about making your money work without losing sleep.

Alright. I’m off my high horse, back to dollar cost averaging.

Can You Dollar Cost Average with Real Estate?

Theoretically, you could buy a rental property monthly with millions of dollars. But I don’t have that kind of money, and you probably don’t either.

Here’s the thing, though: you don’t need to buy an entire property by yourself. You can buy fractional shares in properties, funds that own many properties, or loans secured by properties.

That means you can invest as little as $10 at a time, which in turn means you can dollar cost average every week (or every other week, or every month, yada yada yada).

You have plenty of investment options at your disposal, too. So much so that it can feel overwhelming, but I’ll share exactly how I dollar cost average in real estate, and you can form your investing strategy.

Ways to Use DCA in Real Estate Investing

Some arrogant investors dismiss the importance of diversification. They say things like “If you know what you’re doing, you can earn far higher returns in a single niche than by diversifying.”

They’re not wrong, per se. If you’re an expert in a certain field, you can earn higher returns there than the typical investor aiming for historical average stock returns, for example. But it leaves you vulnerable to shocks in that sector.

Take me in 2008 as a cautionary tale. I knew more about real estate investing than the average person. But I still got my clock cleaned by the 2008 housing bubble collapsing.

Besides, even if you only invest in a single sector, you still want as much diversification as possible. If you love rental properties, you still want to own as many as possible across as many markets as possible.

As you look to diversify, consider dollar cost averaging with these real estate investing strategies.

Publicly-Traded REITs

The most obvious way to dollar cost average real estate investments is just to buy shares in public REITs.

Real estate investment trusts, better known as REITs, are companies that either own properties or debt secured by real property. They trade on public stock exchanges, so you can invest for the cost of a single share (often $10-20). That means you can also sell shares at any time, so they’re among the most liquid real estate investments available.

But that liquidity comes with a few downsides. First, publicly-traded REITs are far more volatile than actual real estate asset values. Compounding the problem, REITs correlate with stock markets more closely than actual real estate prices. That correlation defeats much of the purpose of diversifying your assets. 

Still, public REITs offer a simple, affordable way to dollar cost average real estate investments.

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Real Estate Crowdfunding REITs

Not all REITs trade on public stock exchanges. Over the last 10-15 years, another type of REIT has emerged: private REITs offered by real estate crowdfunding platforms.

Instead of buying and selling through your investment brokerage account, you buy shares directly from the company. When you want to sell, you can also redeem your shares with the company.

They don’t always let you do this right away. Some require a minimum holding period and charge an early redemption fee if you sell your shares too quickly. That makes private REITs less liquid than publicly traded REITs.

But it also makes them less volatile. Share prices tend to move based on the underlying asset values rather than seesaw alongside stock markets.

Like public REITs, crowdfunded REITs are funds that own properties or loans secured by real estate. Some real estate crowdfunding investments like Fundrise own a mix of REITs, secured loans, and individual properties. When you buy in, you buy a tiny slice of all of them.

Crowdfunded Real Estate Loans

Some real estate crowdfunding websites let you invest in a pooled fund that owns many loans backed by real estate. For example, Concreit pays around 7% interest as of November 2024 and lets you withdraw your money anytime. You invest with as little as $1 and set up automated recurring investments.

While 6.5% interest may not sound exciting, the liquidity means I can keep part of my emergency fund in these investments. These pooled investments have remained stable and consistent due to the low loan-to-value ratios and broad exposure.

Others let you pick and choose individual loans to invest in. Groundfloor follows this model, with each loan typically paying an average of 10%. They grade loans by risk, with higher-risk loans paying higher interest (duh).

You can invest as little as $10 toward any given loan, set up automated recurring transfers, and automatically invest in new loans. For example, I set my account to invest $20 apiece in all B, C, and D-grade loans as they go live.

Fractional Ownership in Rentals

Several real estate crowdfunding platforms have launched in recent years that let you buy fractional shares of rental properties.

The largest example is Arrived, which has bought and offered hundreds of properties. They price shares at $100 apiece, letting you buy fractional ownership in rental properties for as little as $100. I’ve invested in properties on Arrived myself and have had a positive experience so far.

The greatest downside to Arrived is that there’s no secondary market for selling shares early. You must hold shares until Arrived sells the property, typically 5-7 years after buying it.

That said, Arrived launched a fund in late 2023 that does offer some liquidity. After a minimum hold period of six months, you can request to redeem your shares. Just beware that they charge an early redemption fee of 2% if you withdraw between 6-12 months after investing and 1% between one and five years after investing.

Two other crowdfunding platforms offer secondary markets for buying and selling shares. Ark7 lets you buy shares for $20 and sell them after a minimum holding period, which depends on if you bought your shares at initial offer or on the market. Lofty offers shares for $50 and lets you sell them anytime but charges a 2.5% fee.

In all platforms, you collect rental income as dividends while you own the property.

Arrived and Ark7 also offer short-term vacation rental properties and long-term rentals. So, if you’ve ever wanted to own an Airbnb property, you can do so with as little as $20.

Want to compare investment property loans?

What do lenders charge for a rental property mortgage? What credit scores and down payments do they require?

How about fix-and-flip loans?

We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

Fractional Ownership in Apartment Buildings (Real Estate Syndications)

While you need more money to invest in real estate syndications than crowdfunding, you can also earn enormous returns. Most syndications aim for 15-30% returns, often exceeding those targets.

If you’re unfamiliar with them, real estate syndications work like this: A commercial real estate investor finds a deal, borrows 50-75% of the purchase price, and puts up some of their own money as a down payment. However, they still need more capital to cover the rest of the down payment, closing, and renovation costs. So, they raise money from passive investors like you and me, offering us fractional property ownership.

These properties are often apartment complexes that need updating. You can think of them as glorified flips, where the syndicator renovates the outdated units throughout a couple of years, raises the rents, and sells them for a huge profit. However, syndications could include commercial office buildings, industrial real estate, mobile home parks, self-storage facilities, and even agricultural land.

You collect distributions from the rental income as a passive investor (a limited partner). When the property sells, you get a hefty payout.

Alternatively, the syndicator could refinance instead of selling. In that case, you return some or all of your investment capital but keep your ownership interest. You keep collecting passive income, even though you potentially got all your money back. When that happens, you earn “infinite returns” on your investment since you no longer have any money tied up in the property.

Syndications have two downsides: they’re not liquid and typically require $50-100K as a minimum investment. That would quash your ability to dollar cost average — unless you join a real estate investing club like ours. We pool our funds to meet that minimum, so each person only has to invest $5,000 per deal.

This is my main form of dollar cost averaging in real estate: I invest $5K every month in syndication, and I now have fractional ownership in thousands of units.

Dollar Cost Averaging Calculator

Are you curious about your future returns when your dollar cost average?

Try playing around with this free dollar cost-averaging calculator to see how quickly you can grow your wealth. If you want your money to explode, try plugging in 15-30% returns on monthly $5,000 investments as we aim for in our Co-Investing Club.

Isn’t math more fun when you’re calculating your future riches?

With enough passive income, you reach financial independence and can retire early. In other words, you buy back control over your time for the rest of your life.

Potential Drawbacks of Dollar Cost Averaging

I know I’ve been singing the praises of DCA, but let’s discuss some downsides quickly. First up, you might leave money on the table in a strong bull market. When markets consistently rise, throwing all your money in at once outperforms DCA. Think about it; your money sits partially in cash while the market climbs.

Another “gotcha” is that DCA requires iron discipline. Missing regular investments defeats the whole purpose. Guess what? Life happens—your car might break down or face unexpected expenses. Every missed investment is a crack in your wealth-building foundation.

Transaction costs can eat into your returns, too, especially with real estate investments. While many platforms offer free trades, others charge fees for each transaction. And, of course, those small fees add up when you’re investing frequently.

Lump Sum vs. Dollar Cost Averaging

Here’s a taste of reality: lump-sum investing typically outperforms DCA. Vanguard studied this and found lump-sum investing beat DCA 68% of the time.

So why even consider DCA? Simple: psychology and risk management.

Most of us aren’t robots. We’re emotional creatures who panic when markets crash. DCA helps you sleep at night by reducing the risk of terrible timing. You might earn less than perfect lump-sum timing, but you’ll also avoid catastrophic losses from buying at the absolute peak.

But hey, most of us don’t have huge lump sums lying around anyway. We save from our paychecks. DCA turns that regular saving into a strategic advantage.

Simply put, lump-sum investing is like sprinting, and DCA is like marathon running. Both get you to the finish line but suit different situations and personalities.

FAQs About Dollar Cost Averaging

Let’s tackle the most common questions about dollar cost averaging in real estate – I’ve heard them all during countless conversations with new and seasoned investors.

How Much Should I Invest Each Time?

Start with what you can consistently maintain. Even $50 monthly builds wealth over time. The key is choosing an amount you won’t need to reduce or skip. As your income grows, increase your investment amount.

How Often Should I Invest?

Monthly investing works well for most people since it aligns with paychecks. Weekly investing can provide more entry points but requires closer attention. Choose a frequency that matches your cash flow and commitment level.

Can I Use DCA for Multiple Investment Types?

Absolutely. I personally have a dollar cost average across stocks, real estate syndications, and crowdfunded properties. Diversification across asset types provides additional protection against market swings.

What If I Have Extra Money Sometimes?

Go ahead and invest it. DCA doesn’t mean you can’t invest extra when you have it. Think of your regular investments as your minimum commitment, not your maximum.

Should I Keep Investing During Market Crashes?

Yes, yes, a thousand times yes. Market crashes are when DCA really shines. You’re buying assets at a discount. Remember: your future self will thank you for staying the course when others panic.

How Do I Start DCA with Real Estate?

Begin with public REITs or real estate crowdfunding platforms that allow small investments. As you build capital, graduate to larger investments like syndications. The key is starting somewhere and remaining consistent.

Final Thoughts on Dollar Cost Averaging in Real Estate

Forget trying to time the market. Smarter people than you or me mess it up all the time.

Instead, focus on steadily investing in real estate (and stocks, for that matter) every single month. Keep plowing money into the market, and over time, you’ll earn compounding returns with exponential growth.

Don’t believe me? Run some numbers for yourself in the dollar cost averaging calculator above. Try stocks and fractional rental properties at 10% returns, or real estate syndications at 15-30% returns to see some wild growth.

Happy investing!♦

Have questions about the dollar cost averaging calculator or how DCA works? Or want to share your plans for dollar cost averaging in real estate? Fire away in the comments below!

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