April 27, 2015

If Monopoly Were Real Life, How Rich Would You Be If You Owned the Entire Board?

Rich as Mr. MonopolyIf you wanted to be as rich as Mr. Monopoly, how much would it take?  How high would your annual income be?  Your net worth?

Those are the question that I pondered sitting at my desk this morning.  Out of pure curiosity, I began to adjust the values of the Monopoly property rents for inflation, using the last full-year CPI figures (2009), knowing that the game was originally released in 1935.  This led to an inflation modification factor of 15.47.

First, I started with only the real estate properties, ignoring the railroads and utilities.  In this case, I applied the inflation modification factor to each rent figure for the individual title deeds.

Inflation Adjusted Monopoly Rent Figures

Next, I took these monthly rent figures and annualized them to see the total pre-tax rent profit each year.  These would not be your gross rents, but rather an adjusted pre-tax rent income after covering expenses such as insurance, maintenance, lawn care, utilities, etc.

Annualized Monopoly Inflation Rent Values

Finally, I took the annualized pre-tax rent profit and applied a 10% capitalization rate to estimate a market value.  This is the estimated cost of acquiring such a property.

Net Worth Value of Inflation Adjusted Monopoly Properties

Some Interesting Facts

If you owned all of the real estate property on the board, excluding the railroads and utilities, you would have a net worth of $40,562,340.  You would have annual pre-tax rental income of $4,056,234.  You would definitely be flying around the world in your private jet, driving your Mr. Monopoly car, and wearing your Mr. Monopoly suit at that point if you had those desires.

Real Life Monopoly ManBut it wouldn’t take that kind of money to be successful.  If you just became a “Light Blue Property” millionaire, no one will ever know your name, you won’t appear on the pages of Fortune magazine or in The Wall Street Journal, but you will be collecting $315,565.80 per year in rent from your little monopoly. You’d be living in your home town with your neighbors having no clue you had a $3+ million net worth.

The Railroads and Utilities

What about the railroads and utilities?  To calculate their value, I have to use the same assumptions as our real estate, that the dividend income is monthly.  Going from there, the range of potential income and net worth adjusted for inflation for these Monopoly properties are as follows.  I applied a 5% dividend yield requirement because I think the current dividend yields in the market are too low to be rational.

Inflation Adjusted Railroad Values and Rents Monopoly

That means if you wanted to be the real-life equivalent of owning all 4 railroads in Monopoly, you’d need to buy $742,560 worth of railroad stock with a 5% cash dividend yield.  You would collect $37,128 in annual dividends.

As for the utilities, I’m not going to put up a chart.  The maximum payout is 12×10 = $120 x 15.47 inflation modification factor = $1,856.40 per month x 12 = $22,276.80 per year / .05 for 5% dividend yield = $445,536 market value of shares.

That is, the real life equivalent of owning utility stocks maxes out in Monopoly terms at $445,536 worth of shares generating $22,267.80 in cash dividends each year.

What It Would Take To Own the Entire Monopoly Board in Real Life

Monopoly MoneyTo be as rich as Mr. Monopoly and own entire Monopoly game in real life, adjusted for inflation, would mean a net worth of $41,750,436 generating annual pre-tax income of $4,115,629.80.

Applying The Monopoly Model to Real Life

It’s interesting from a psychological perspective that almost no one tries to amass that kind of money (seriously, how many people do you know in your own life that make a point to acquire rental houses, apartments or hotels?).  Just as bad, those who do often give in to the temptation to employ too much leverage so one bad economic cycle wipes them out, often in a catastrophic bankruptcy.

I think it would be fun for a really close family to create a family holding company or investment partnership, and then try to build a real life Monopoly game that generated wealth for the individual members.  You could even commission an artist to create little replicas of your properties on a Monopoly board to mark off as you became successful.  This is the sort of thing that ritualizes your business into a game.

  • http://www.joshuakennon.com/ Joshua Kennon

    Welcome to the site =)

    You are correct on the implications for valuation in a closed economy such as a single Monopoly game with finite players.

    I was interested in calculating a ballpark capitalized value in the real world global economy for the inflation-adjusted rental and dividend income of a portfolio of securities and assets with payouts equal to those found in the Monopoly game.

    A small, but vital, distinction.