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Nomad with Lease-Option Exit Starting with $3K

This Scenario was created to be used with the updated class "How to Acquire a Multi-Million Dollar Real Estate Portfolio Post-COVID-19 with Just $3,000" for June, 2020. It has you buying a Nomad™ property with nothing down using a USDA/VA or local 0% down payment loan for your first purchase. Then, collect an option fee from a tenant-buyer for the 5% down payment required for purchasing the next several Nomad™ properties. Repeat finding tenant-buyers each time you move out of the previous property and use the tenant-buyer's option fee for down payment to move into a new property with 5% down payment. As tenant-buyers purchase the properties from you, use the proceeds after capital gains, depreciation recapture, sales costs and crediting the tenant-buyer their option fee to buy additional 20% down payment properties you don't need to move into. Stop moving into Nomad™ properties after buying your fifth 5% Nomad™ property. Stop putting tenant-buyers into properties after month 109 and eventually keep up to ten 20% down payment properties until you reach financial independence and replace your income from your rentals and money invested in stocks.

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

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

Please register for a Forever Free Account or Login to your existing Real Estate Financial Planner™ software to copy this  Scenario into your account.

Create "Forever Free" Account

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 360 months (30 years)
  • 23.11% effective income tax rate
  • 3% inflation rate
  • 4% 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

Accounts

Summary of assumptions for the Account in this Scenario.

  • Account Name:  Savings Account
  • $10,000 starting account balance
  • 0% yearly rate of return (at start)
  • Asset Type: Cash

Properties

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

Property Address/Description: 20% Down

  • 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:  Savings Account
  • $365,000 property value and purchase price and it goes up at a rate of 3% per year.
  • 20% of purchase price for down payment.
  • 2% of purchase price in closing costs at time of purchase.
  • No seller concessions.
  • 4% is the mortgage interest rate with a term of 360 month mortgage term.
  • $2,125 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.
  • 1% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $365,000 that's about $3,650 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 $365,000 that's about $1,460 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: 5% Down From Tenant-Buyer

  • 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:  Savings Account
  • $365,000 property value and it goes up at a rate of 3% per year.
  • $351,750 property purchase price
  • 0% of purchase price for down payment.
  • $5,000 fixed dollar amount in closing costs at time of purchase.
  • $5,000 fixed dollar amount in seller concessions to help with closing costs at time of purchase.
  • 3.375% is the mortgage interest rate with a term of 360 month mortgage term.
  • Private Mortgage Insurance (PMI) at a rate of 0.45% of the initial loan balance until the loan-to-value drops below 78%.
  • $2,175 per month in rent but rent increases at a rate of 3% per year.
  • 0% of the monthly income is the assumed vacancy rate.
  • 5% of the monthly income is the assumed maintenance rate.
  • 1% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $365,000 that's about $3,650 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 $365,000 that's about $1,460 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: Nothing Down

  • 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:  Savings Account
  • $365,000 property value and it goes up at a rate of 3% per year.
  • $370,000 property purchase price
  • 0% of purchase price for down payment.
  • $5,000 fixed dollar amount in closing costs at time of purchase.
  • $5,000 fixed dollar amount in seller concessions to help with closing costs at time of purchase.
  • 3.375% is the mortgage interest rate with a term of 360 month mortgage term.
  • Private Mortgage Insurance (PMI) at a rate of 0.45% of the initial loan balance until the loan-to-value drops below 78%.
  • $2,175 per month in rent but rent increases at a rate of 3% per year.
  • 0% of the monthly income is the assumed vacancy rate.
  • 5% of the monthly income is the assumed maintenance rate.
  • 1% of the value of the property each year is the assumed property taxes rate. Based on the initial value of $365,000 that's about $3,650 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 $365,000 that's about $1,460 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.

Sell Rental Properties After Owning Them For Specific Period of Time - Sell Early Properties to Tenant-Buyers

Buy Property When Account Has Down Payment - Buy First Nomad™ with Nothing Down

  • This  Rule only runs for one month, month 1.
  • This  Rule will buy another copy of the Dynamic (template property) Nothing Down whenever  Savings Account has enough for down payment and closing costs.
  • This  Rule ignores Debt-To-Income ratio.
  • This  Rule will only buy 1  Properties maximum. But if you sell any, it will try to buy more to replace them.

Paycheck and Personal Expenses - Job Income and Personal Expenses (Excluding Housing)

  • This  Rule runs for the entire  Scenario.
  • Depositing both your paycheck and pulling expenses out of the same  Savings Account.
  • 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.
  • The paycheck will stop when they reach "Financial Independence" (goal of Minimum Target Monthly Income in Retirement achieved).
  • Personal expenses are $1,786.66 Inflation Adjusted per month.

Buy Property When Account Has Down Payment - Buy 5% Down Payment Nomads™

  • This  Rule starts on month 1 and runs through month 61.
  • This  Rule will buy another copy of the Dynamic (template property) 5% Down From Tenant-Buyer whenever  Savings Account has enough for down payment and closing costs.
  • 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.

Buy Property When Account Has Down Payment - Buy 20% Down Payment Rentals

  • This  Rule runs for the entire  Scenario.
  • This  Rule will buy another copy of the Dynamic (template property) 20% Down whenever  Savings Account 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.

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 60  Sold Property After Owning It For 60 Months
  • Month 61  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 72  Sold Property After Owning It For 60 Months
  • Month 72  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 84  Sold Property After Owning It For 60 Months
  • Month 84  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 96  Sold Property After Owning It For 60 Months
  • Month 96  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 108  Sold Property After Owning It For 60 Months
  • Month 108  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 150  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 183  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 209  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 230  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 248  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 264  Bought New Dynamic Property Based On Rule Buy Property When Account Has Down Payment
  • Month 301  Achieved Financial Independence Goal