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10 5% DP Nomad Properties House Hacking with 2 Roommates

Scenario set up for 3 part webinar with Chris Lopez and Joe Massey. This one is buying ten 5% down payment properties as a Nomad but this time with 2 roommates (house hacking).

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

2 Accounts (including Default Cash Account)
1 Properties
3 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 480 months (40 years)
23.11% effective income tax rate
3% inflation rate
5.125% mortgage interest rate
3.25% yearly safe withdrawal rate (SWR)
$4,000 minimum target monthly income in retirement (MTMIR) in today's dollars
$20,000 ideal target monthly income in retirement (ITMIR) in today's dollars

Accounts

Summary of assumptions for the Account in this Scenario.

Account Name: VTSMX with CAGR of 8.97% over 1871-2017
$60,000 starting account balance
8.97% yearly rate of return (at start)
Asset Type: Cash

Properties

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

Property Address/Description: Typical Family Home 5% DP Upfront PMI

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: VTSMX with CAGR of 8.97% over 1871-2017
$300,000 property value and purchase price and it goes up at a rate of 3% per year.
5% of purchase price for down payment.
2.85% of purchase price in closing costs at time of purchase.
No seller concessions.
5.125% is the mortgage interest rate with a term of 360 month mortgage term.
No monthly Private Mortgage Insurance (PMI). It is possible it is being included as a single up-front, lump-sum payment in the Closing Costs or as a lender-paid PMI in the interest rate.
$1,933.64 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.
0.75% 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 $2,250 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.

Paycheck and Personal Expenses

This Rule runs for the entire Scenario.
Depositing both your paycheck and pulling expenses out of the same VTSMX with CAGR of 8.97% over 1871-2017.
Both paycheck and personal expenses will be Inflation Adjusted.
Gross paycheck is $5,000 Inflation Adjusted.
Assuming a tax rate of 23.11% on your paycheck.
Net paycheck (after taxes) is $3,844.50 Inflation Adjusted per month.
This paycheck will not stop at retirement.
Personal expenses are $1,009.74 Inflation Adjusted per month.

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) Typical Family Home 5% DP Upfront PMI whenever VTSMX with CAGR of 8.97% over 1871-2017 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.

Paycheck and Personal Expenses

This Rule runs for the entire Scenario.
Depositing paycheck into VTSMX with CAGR of 8.97% over 1871-2017 but no personal expenses with this Rule.
Personal expenses will be Inflation Adjusted.
Gross paycheck is $1,200 Inflation Adjusted.
Assuming a tax rate of 23.11% on your paycheck.
Net paycheck (after taxes) is $922.68 Inflation Adjusted per month.
This paycheck will not stop at retirement.

Significant Events

These are the Significant Events for this Scenario.

Month 1 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 13 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 25 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 37 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 49 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 61 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 73 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 85 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 97 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 109 Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
Month 173 Achieved Financial Independence Goal
Month 361 Paid Off Mortgage
Month 373 Paid Off Mortgage
Month 385 Paid Off Mortgage
Month 386 Achieved Ideal Financial Independence Goal
Month 397 Paid Off Mortgage
Month 409 Paid Off Mortgage
Month 421 Paid Off Mortgage
Month 433 Paid Off Mortgage
Month 445 Paid Off Mortgage
Month 457 Paid Off Mortgage
Month 469 Paid Off Mortgage