Buy Rentals All Cash
Since we're comparing multiple
Gross Paychecks and Expenses both increase with inflation over time.
With income varying, the amount able to be saved varies too. When you earn less with the same expenses, that means you save less. When you earn more with the same expenses, you save more.
The chart below also includes unrented properties (that's the one you're living in) as part of your expenses. Your mortgage payment (principle and interest) remain fixed (unless you refinance, pay it off or move to a different property), but taxes and insurance do change over time.
Once you achieve financial independence and you stop working your job, your savings from your job goes to zero (actually it goes negative since your income is zero and your expenses are subtracted from zero).
Achieving Goal of Financial Independence
What is the first month you've achieve financial independence? We define financial independence as the sum of the following exceeds your Minimum Target Monthly Income in Retirement (MTMIR):
- Cash flow from rental properties and
- Passive income (like social security, pensions, annuities) and
- Your Safe Withdrawal Rate times your total Account Balances
How quickly do you achieve your goal of replacing your Minimum Target Monthly Income in Retirement from your cash flow, passive income, and your safe withdrawal rate times your account balances? This chart shows what percent of your goal you've achieved over time. The dotted black line is when you've achieved 100% of your goal and you've achieved financial independence.
A major factor in calculating Debt-To-Income is income. The Real Estate Financial Planner™ software does check your Debt-To-Income before it allows you to purchase your next property.
Minimum Gross Monthly Income Required
What's the minimum gross monthly income required to execute the strategy?
Number of Properties Owned
Your income impacts how quickly you can save down payments and qualify to buy your next property. The following chart shows how many properties you own over time for the 3
The impact on your overall Net Worth?
First $100K Is The Hardest
Charlie Munger says that saving up your first $100K is the hardest. So, how quickly does each of these strategies save up their first $100K?
Let's then look at how long it takes, in months, to build a Net Worth of a million dollars in $100K increments.
Same data showing how long it takes to achieve each $100K but presented as connected lines instead of as columns.
The following shows what happens if we zoom in and just look at how quickly these achieve a net worth of one million dollars.
We've limited the $100K charts above to just show up to the first $1MM (ten $100Ks).
The chart below shows how long it takes, in months, to acheive groups of one million dollars.