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SS 020 Investing $100,000 in 20% DP Rentals and Stocks at Approx 8.97%/yr

We start with $100K invested in stocks earning a fixed rate of return of 8.97% per year. We start buying 20% down payment rental properties whenever we have enough for a down payment plus at least $10K in cash reserves (inflation adjusted over time). However, we add a Rule that makes the stock market Yearly Rate of Return variable. And, we add Rules to make Appreciation Rate, Rent Appreciation Rate and Interest Rates all variable as well.

The  Scenario you want to copy into your Real Estate Financial Planner™ software has the following:

  • 2  Accounts (including  Default Cash Account)
  • 2  Properties
  • 5  Rules

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Once it is in your account, you can view detailed  Charts for dozens of variables and edit any of the assumptions for  Accounts,  Properties, and  Rules to run your own what-if  Scenarios.

You can change things like:

  • Adjust how much money you start with in any  Account
  • Model variable stock, bond and real estate rates of returns
  • Change how many  Properties you buy and when you buy them
  • Set your own personalized target monhtly income in retirement to indicate when you reach financial independence
  • Model receiving social security payments when you reach a certain age
  • See what happens if there is a market crash or correction for your stocks, bonds and/or your real estate
  • Tweak price and rent appreciation rates for individual  Properties or all your  Properties
  • Find out what happens if you pay off your mortgages early... with cash flow each month or only when you have enough to pay off the  Property in full
  • Use equity in  Properties you own to cash-out refinance and buy more  Properties or invest it elsewhere
  • Model buying more  Properties than you need then selling off any extras to pay off the remaining  Properties to achieve your own user-defined financial independence number
  • Evaluate your own safe withdrawal rate and see how it impacts your investment plan
  • And much, much more...

Scenario

  • Modeled for 720 months (60 years)
  • 15% effective income tax rate
  • 3% inflation rate
  • 4.875% mortgage interest rate
  • 4% yearly safe withdrawal rate (SWR)
  • $5,000 minimum target monthly income in retirement (MTMIR) in today's dollars
  • $20,000 ideal target monthly income in retirement (ITMIR) in today's dollars
  •  100 Monte Carlo runs

Accounts

Summary of assumptions for the Account in this Scenario.

  • Account Name:  $100,000 Invested in VTSMX at 8.97%/year
  • $100,000 starting account balance
  • 8.97% yearly rate of return (at start)
  • Asset Type: Stocks

Properties

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Summary of assumptions for Properties in this Scenario (at the start of the Scenario).

Property Address/Description: 4/2 SFH - 20% DP

  • This  Property is a Dynamic resuable template of a property that we can buy multiple copies of using  Rules.
  • This  Property uses dynamic  Rules to determine when we buy/sell it in the  Scenario.
  • Account for down payment, income and expenses for this  Property:  $100,000 Invested in VTSMX at 8.97%/year
  • $300,000 property value and purchase price and it goes up at a rate of 3% per year.
  • 20% of purchase price for down payment.
  • 1% of purchase price in closing costs at time of purchase.
  • No seller concessions.
  • 4.125% is the mortgage interest rate with a term of 360 month mortgage term.
  • $1,857.05 per month in rent but rent increases at a rate of 3% per year.
  • 3% of the monthly income is the assumed vacancy rate.
  • 10% of the monthly income is the assumed maintenance rate.
  • 10% of the monthly income is the assumed property management rate.
  • $600 per year for HOA fees on the property and they increases at a rate of 3% per year.
  • 0.65% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $300,000 that's about $1,950 per year in property taxes at the start and it changes as the property value changes.
  • 0.4% of the value of the property each year is the assumed property insurance rate. Based on the initial value of $300,000 that's about $1,200 per year in insurance costs at the start and it changes as the property value changes.
  • This is a residential property and 15% of purchase price is considered the value of the land (when doing our depreciation calculation).

Return in Dollars Quadrant™

The following is the estimated Return in Dollars Quadrant™ for this property based on its original assumptions for the first year.

Return On Investment Quadrant™

The following are the estimated Return on Investment Quadrant™ for this property for year 1. We take the returns for each component and divide by the "Total Cost to Close" (down payment, rent ready costs, closing costs - seller concessions). This first one ignores reserves.

ROIQ+R6™

Return on Investment Quadrant™ with 6 months of reserves at 1%.

ROIQ+R12™

Return on Investment Quadrant™ with 12 months of reserves at 8%.

How to Calculate

See the steps walking you through how to calculate various metrics for this property.

Walkthrough how to calculate...

Property Address/Description: 4/2 SFH - 20% DP

  • This  Property is a Dynamic resuable template of a property that we can buy multiple copies of using  Rules.
  • This  Property is a Nomad™ property that you live in until you buy your next owner-occupant property. When you buy your next Nomad™ property, this one becomes a rental.
  • This  Property uses dynamic  Rules to determine when we buy/sell it in the  Scenario.
  • Account for down payment, income and expenses for this  Property:  $100,000 Invested in VTSMX at 8.97%/year
  • $300,000 property value and purchase price and it goes up at a rate of 3% per year.
  • 20% of purchase price for down payment.
  • 1% of purchase price in closing costs at time of purchase.
  • No seller concessions.
  • 3.875% is the mortgage interest rate with a term of 360 month mortgage term.
  • $1,857.05 per month in rent but rent increases at a rate of 3% per year.
  • 3% of the monthly income is the assumed vacancy rate.
  • 10% of the monthly income is the assumed maintenance rate.
  • 10% of the monthly income is the assumed property management rate.
  • $600 per year for HOA fees on the property and they increases at a rate of 3% per year.
  • 0.65% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $300,000 that's about $1,950 per year in property taxes at the start and it changes as the property value changes.
  • 0.4% of the value of the property each year is the assumed property insurance rate. Based on the initial value of $300,000 that's about $1,200 per year in insurance costs at the start and it changes as the property value changes.
  • This is a residential property and 15% of purchase price is considered the value of the land (when doing our depreciation calculation).

Return in Dollars Quadrant™

The following is the estimated Return in Dollars Quadrant™ for this property based on its original assumptions for the first year.

Return On Investment Quadrant™

The following are the estimated Return on Investment Quadrant™ for this property for year 1. We take the returns for each component and divide by the "Total Cost to Close" (down payment, rent ready costs, closing costs - seller concessions). This first one ignores reserves.

ROIQ+R6™

Return on Investment Quadrant™ with 6 months of reserves at 1%.

ROIQ+R12™

Return on Investment Quadrant™ with 12 months of reserves at 8%.

How to Calculate

See the steps walking you through how to calculate various metrics for this property.

Walkthrough how to calculate...

Rules

These are the Rules included with this Scenario.

Buy Property When Account Has Down Payment

  • This  Rule runs for the entire  Scenario.
  • This  Rule will buy another copy of the Dynamic (template property) 4/2 SFH - 20% DP whenever  $100,000 Invested in VTSMX at 8.97%/year has enough for down payment and closing costs...
    • Plus at least $10,000 Inflation Adjusted left over in the  Account
  • This  Rule ignores Debt-To-Income ratio.
  • This  Rule will only buy 10  Properties maximum. But if you sell any, it will try to buy more to replace them.

Set Value On Accounts

  • This  Rule runs for the entire  Scenario.
  • Changes the value of Yearly Rate of Return on  $100,000 Invested in VTSMX at 8.97%/year.
  • The  Rule sets the value of Yearly Rate of Return each month that it runs using a random number between -44.33 and 65.47 with a standard deviation of 18.300 in discrete steps of 0.010.
  • However, values can never be lower than -44.330 and never higher than 65.470.

Set Value On Properties

This  Rule adjusts the Appreciation Rate on all OWNED  Properties in the  Scenario.

  • This  Rule runs for the entire  Scenario.
  • Changes the value of Appreciation Rate on all owned  Properties in the  Scenario.
  • The  Rule sets the value of Appreciation Rate each month that it runs using a random number between -6 and 12 with a standard deviation of 3.000 in discrete steps of 0.100.
  • However, values can never be lower than -6.000 and never higher than 12.000.

Set Value On Properties

This  Rule adjusts the Rent Appreciation Rate on all OWNED  Properties in the  Scenario.

  • This  Rule runs for the entire  Scenario.
  • Changes the value of Rent Appreciation Rate on all owned  Properties in the  Scenario.
  • The  Rule sets the value of Rent Appreciation Rate each month that it runs using a random number between -6 and 12 with a standard deviation of 3.000 in discrete steps of 0.100.
  • However, values can never be lower than -6.000 and never higher than 12.000.

Set Value On Properties

This  Rule adjusts the Mortgage Interest Rate on just one  Property template in the  Scenario; the 4/2 SFH - 20% DP Property template.

  • This  Rule runs for the entire  Scenario.
  • Changes the value of Mortgage Interest Rate on 4/2 SFH - 20% DP.
  • The  Rule adds to the previous month's value of Mortgage Interest Rate each month that it runs using a random number between -.375 and .375 with a standard deviation of 0.125 in discrete steps of 0.125.
  • However, values can never be lower than 3.500 and never higher than 11.000.