Peter Contemplates 5%, 20% and 25% Down Payments with Market Variability

For the third week (and the final Real Estate Investor Story for the rest of 2020 as I take time for James), we discuss Peter from Denver.

Last week, we discussed adding some variability in stock market rate of return, property appreciation rate, rent appreciation rate and mortgage interest rate as we discussed Peter putting 20% down to purchase rental properties. This week, we're still using the same variability but considering 5% down, 20% down and 25% down.

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Static Assumptions

I spend some time showing you the new Cash Flow Power Meter™ for both the static Scenarios we covered in our first episode with Peter and the variable ones below.

For example, here's a chart showing Rent with the Cash Flow Power Meter™ underlay for putting 25% down payments for the first property purchased. It basically shows that Peter has essentially break-even cash flow with professional property management at the time of purchase and it gets better from there.

This is the same chart but for 20% down payments. It shows Peter has positive cash flow self-managing at the time of purchase and gets better from there.

And, finally, this one is for putting 5% down as a Nomad™. It shows that Peter has about break-even cash flow including the benefits of Cash Flow from Depreciation™ if he managed the property himself when he first starts renting it. It gets better from there.

Variable Assumptions

When we make appreciation, rent appreciation and mortgage interest rates variable… each Property varies considerably from the static assumptions we previously considered. Some are better than our original assumptions, but many are worse… some much worse.

Each time we run the Scenario we will get different results.

For example, here's one example of the first property with 25% down but with variable appreciation, rent appreciation and mortgage interest rates.

Here's an example of the first property with 20% down again with variable appreciation, rent appreciation and mortgage interest rates.

And finally, here's 5% down with the same variability.

Achieving Financial Independence With Variability

We can compare the probability of successfully achieving financial independence between 20% down payments and 25% down payments over 100 Monte Carlo runs in the chart below.

Or, we can add in to the above comparison the 5% down payment Nomad™ option as well. That's shown in the chart below.

And finally, a chart not shown in the video. Here's a comparison showing the middle 50% of runs for each of the 3 Scenarios.

And finally, a chart showing what percentage of the 100 runs achieved financial independence.

Change My Assumptions

Use the button below to copy the Scenario to your own Real Estate Financial Planner™ software account to modify any of the assumptions or to drill down into any of the 100+ Charts.

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Scenario into my Real Estate Financial Planner™ Software

10 25% Down Payment Rentals - Variable with 2 Accounts, 2 Properties, 7 Rules, 2 Goals
Or, read the detailed, computer-generated, narrated Blueprint™.

Copy

Scenario into my Real Estate Financial Planner™ Software

10 20% Down Payment Rentals - Variable with 2 Accounts, 1 Property, 7 Rules, 2 Goals
Or, read the detailed, computer-generated, narrated Blueprint™.

Copy

Scenario into my Real Estate Financial Planner™ Software

10 5% Down Payment Nomad™ Rentals - Variable with 2 Accounts, 2 Properties, 7 Rules, 2 Goals
Or, read the detailed, computer-generated, narrated Blueprint™.