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Ep 2 Andrea - $100/mo More In Rent

This is Episode 2 of Real Estate Financial Planner™ podcast.

Andrea does everything in her power to maximize rent on properties and manages to increase monthly rent by $100 per month on all rentals.

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)
  • 15% effective income tax rate
  • 3% inflation rate
  • 4.875% mortgage interest rate
  • 4% 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:  All-In-One Account
  • $100,000 starting account balance
  • 8% yearly rate of return (at start)
  • Asset Type: Stocks

Properties

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

Property Address/Description: $100/mo More In Rent

  • 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:  All-In-One Account
  • $250,000 property value and purchase price and it goes up at a rate of 2% per year.
  • 5% of purchase price for down payment.
  • 1% of purchase price in closing costs at time of purchase.
  • No seller concessions.
  • 3.125% is the mortgage interest rate with a term of 360 month mortgage term.
  • Private Mortgage Insurance (PMI) at a rate of 0.8% of the initial loan balance until the loan-to-value drops below 80%.
  • $1,700 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.
  • 0.65% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $250,000 that's about $1,625 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 $250,000 that's about $1,000 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).

Rules

These are the Rules included with this Scenario.

Buy Property When Account Has Down Payment - Buy Nomad™ Properties

  • This  Rule runs for the entire  Scenario.
  • This  Rule will buy another copy of the Dynamic (template property) $100/mo More In Rent whenever  All-In-One Account has enough for down payment and closing costs...
    • Plus at least $10,000 Inflation Adjusted left over in the  Account
  • This  Rule requires that with the purchase of the property with this  Rule that Debt-To-Income ratio remains below 45%.
  • This  Rule will only buy 9  Properties maximum. But if you sell any, it will try to buy more to replace them.

Paycheck and Personal Expenses - Job and Living Expenses

  • This  Rule runs for the entire  Scenario.
  • Depositing both your paycheck and pulling expenses out of the same  All-In-One Account.
  • Both paycheck and personal expenses will be Inflation Adjusted.
  • Gross paycheck is $4,000 Inflation Adjusted.
  • Assuming a tax rate of 19.65% on your paycheck.
  • Net paycheck (after taxes) is $3,214 Inflation Adjusted per month.
  • The paycheck will stop when they reach "Financial Independence" (goal of Minimum Target Monthly Income in Retirement achieved).
  • Personal expenses are $1,980.54 Inflation Adjusted per month.

Passive Income - Andrea's Social Security at Age 65

  • This  Rule starts on Jan 2046 and runs for the rest of the  Scenario.
  •  Passive Income is typically used for things like social security, pensions, or annuities. Unlike  Paycheck and Personal Expenses they count toward whether you qualify for financial independence.
  • $1,423 Inflation Adjusted in gross passive income per month.
  • Assuming a tax rate of 18.63% on this passive income.
  • Net (after taxes) deposited to  All-In-One Account is $1,157.90 Inflation Adjusted per month.

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 119  Achieved Financial Independence Goal
  • Month 361  Paid Off Mortgage
  • Month 373  Paid Off Mortgage
  • Month 385  Paid Off Mortgage
  • Month 397  Paid Off Mortgage
  • Month 409  Paid Off Mortgage
  • Month 421  Paid Off Mortgage
  • Month 425  Achieved Ideal Financial Independence Goal
  • Month 433  Paid Off Mortgage
  • Month 445  Paid Off Mortgage
  • Month 457  Paid Off Mortgage