Property Assumptions
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What is Nomad? Read about the different types of Nomad:
- Catch Up Nomad – Behind on saving for retirement?
- College Nomad – Have young kids or grandkids and want to pay for college?
- Young Nomad – Young with a great job? Plan for retirement now with this Nomad.
- Legacy Nomad – Leave a legacy by helping your kids and grandkids do Nomad.
See the analysis of how this property might work with Nomad…
Catch Up Nomad for $286,000 House
This following is another example of a Catch Up Nomad scenario with a $286,000 property renting for $1,825.
The Catch Up Nomad is usually a Nomad is behind on saving for retirement and is willing to utilize the Nomad investing strategy to catch up.
Rental Property Expenses
These are the expenses for year 2 for the first property you purchased.
TIP: Click on Mortgage Payment in the legend to see the pie chart of expenses excluding the mortgage payment.
Value Of Homes First Ten Years
This chart shows the value of your first home over the first 10 years.
If you were to buy a single house as an owner occupant and move in, the following chart shows you the value of that house for each year 1 through 10. In other words, you bought a home for $286,000 in year 1. If it goes up in value 3.00% per year, by year 10 that home will be worth $373,165.
Also, since we are using the first house as a model for the houses you buy in years 2 through 10, it is also the purchase price of the houses you buy over the full ten year period for Nomad.
Appreciation of One Home First Ten Years
This chart shows you how much each individual house is going up in value for each year.
In the first year, with the first house you bought and live in, if they go up 3.00% per year you end up with $8,580 in appreciation.
In year 10, you would see $11,195 in appreciation for that year alone.
Realize if you own multiple houses (like you would from year 2 on) you are seeing that amount per house that you own.
Debt Paydown of One Home for First Ten Years
The following chart shows how much of the debt you’ll pay down each the loan of a single home for the first 10 years.
That means that in the first year, you’d pay off $4,383 on the loan for the first house.
In the second year, you’d pay off $4,584 on the first house and $4,515 on the second house.
Each year, the amount you pay off increases a little bit. So, the longer you own a home the more debt you pay down on that home each year.
As you add additional houses, the amount you’re paying down in debt each year grows. Debt paydown really starts to add up and as long as you’re making your mortgage payment, you do get this money. It is not relying on the market or rent going up.
Cash Flow of One Home for First Ten Years
The following chart shows how much cash flow you’d have one the first property over the first ten years.
A negative number means there is negative cash flow on the property for that year after taking into account paying all the expenses you’ve assumed including maintenance on the property. It does NOT take into account any tax benefits. It is possible to have negative cash flow shown here and still have it be net positive after you take into account tax benefits from depreciation.
Gross Depreciation of One Home for First Ten Years
The following chart shows the gross depreciation benefit you’d have on the first property over the first ten years. This is the amount you can offset income with.
Cash Flow From Depreciation for One Home for First Ten Years
The following chart shows the cash flow from depreciation (after taxes) you’d have one the first property over the first ten years. This is based on your estimated tax rate.
Total Cash Flow (with Depreciation) for One Home for First Ten Years
The following chart shows the net total cash flow from the first home over the first ten years including the estimated cash flow from depreciation (after taxes). This is based on your estimated tax rate.
Total Cash Returns for One Home for First Ten Years
The following chart shows the total cash returns for one home for the first ten years. The columns to the left show the component returns and the orange column to the right shows the sum of the returns.
TIP: Click on the words in the legend to toggle specific components on and off.
Maintenance Reserve for One Home for First Ten Years
You need to be setting aside money each month to take care of maintenance on your rental properties.
The chart below shows how much we’re setting aside each year for maintenance on the first property only for the first 10 years.
You’d be setting this amount aside from rent received for each property you own.
10 Houses Over 40 Years
Previously, we were showing charts for the first house you purchase over the first ten year period.
Now, we’re going to switch it up and show you what purchasing 10 houses (1 per year over 10 years) looks like. The time period we will show is the first 40 years.
If you’ve never seen me explain these charts before or if you need a reminder, there are a few things to be aware of.
- You’re buying 1 house per year for the first 10 years. So, in year 1, you only own 1 house. In year 2, you only own 2 houses, etc.
- At the end of year 30, you’ve paid off the first house. By the end of year 31, you’ve paid off the second house.
- You don’t collect cash flow on a house for the first year you own it, since you’re living there in that first year. The same is true of depreciation since you only depreciate rental properties (not owner occupant properties). You do get debt paydown and appreciation in that first year.
Total Amount Invested
The following chart shows the total amount you’d invest to do 10 properties over 10 years.
It primarily shows the down payments required to buy each property in the first 10 years. If you have negative cash flow though, I do something a little different.
If you have negative cash flow, I show the negativate cash flow as an investment as well. If you’ve got to come out of pocket to cover negative cash flow, it only makes sense to include it as an investment to do the Nomad model.
Later on, when I calculate Return on Investment, I will use the sum of the down payment AND the negative cash flow.
Sum of Total Amount Invested
This chart shows you the sum of the amounts you had to invest each year. This gives you an idea of how much total or overall that you’d need to do the Nomad model including down payments and if you have negative cash flow, that as well.
Total Equity
The following chart shows the total equity in the property. Equity is the difference between the value of the property and the loan balance of the property.
This is showing the sum of the equity for that year and for all the properties (in that year).
Net Cash Flow For All Houses
The following chart shows the amount of cash flow that was generated in that year for all the houses that were owned in that year and that were rented.
So, in year 1 since you’re not renting any properties, that would be zero. In year 2, you’d own two properties, but only 1 would be rented so it would be the cash flow from that property only.
In year 3, you’d have two properties rented so it is the sum of the cash flow from both of those properties. And so on.
Equity and Cash Flow For All Houses
This next chart shows you the total amount of equit you have for all the properties owned in that year, plus it shows you the total amount of cash flow.
It is important to point out that this is NOT the cash flow just for that year, but the sum of the cash flow for all the properties owned from the first year you rented the first one through the year shown. So, it is the sum of all cash flows for all the years to that point.
How Does Nomad Compare to Investing in Stocks
This next table shows how doing the Nomad model compares to taking the same amount of money and investing in the stock market.
Year | Amount Invested | Stocks @ 10.00% | Nomad Equity | Nomad Cash Flow | Nomad How Much Better |
10 | $177,831 | $303,155 | $919,742 | $16,039 | $632,627 |
15 | $180,303 | $492,122 | $1,865,755 | $147,860 | $1,521,492 |
20 | $180,303 | $792,568 | $2,994,979 | $451,495 | $2,653,906 |
25 | $180,303 | $1,276,438 | $4,344,787 | $954,310 | $4,022,658 |
30 | $180,303 | $2,055,717 | $5,960,569 | $1,688,029 | $5,592,881 |
- Year: shows you the year number for doing the plan (whether that’s stocks or Nomad).
- Amount Invested: the amount you invested in the stock market or the amount you invested in Nomad including down payment and all negative cash flow.
- Stocks @ 10.00%: the value of your stock portfolio in that year including your initial investment and all the returns you’ve earned through that year assuming a rate of return of 10.00% per year.
- Nomad Equity: the total amount of equity for all houses at that point. It includes the down payments you’ve made because we calculate it by looking at the house’s current value minus the current loan balance.
- Nomad Cash Flow: this is the sum of all the cash flows to that year. When we are negative, we are double handicaping Nomad for the column “How Much Better Doing Nomad” because we count it as both an “Amount Invested” and also a negative return on that investment. It doesn’t matter though, Nomad is still better.
- Nomad How Much Better: Add up the “Nomad Equity” and “Nomad Cash Flow” and subtract the “Stocks @ 10.00%” to see how much better it is to do Nomad through that year.
Stock Market Compared to Nomad
The chart below shows a comparison of the stock market to doing the Nomad model. It uses the same down payment (and any negative cash flow) as the amount invested.
For the stock market line, it takes the total amount you invested and compounds it at 10.00% per year.
For the Nomad line, it takes total equity and total positive cash flow through that year.
Nomad Versus Stock Market Summary Year 40
The next chart shows a quick comparison of how the stock market at 10.00% per year does compared to the Nomad model of buying 10 houses.
It is a snapshot for year 40. So, if you need to see numbers from a shorter time period for Catch Up Nomad, you can use the chart above.
Stocks Versus Nomad Cash Flow
What if you wanted to just take all the cash flow generated each year and spend it? That’s what this next chart shows.
It shows that instead of compounding the return from the stock market by reinvesting the return, you just spend it. The Stock Market Return line shows you how much cash flow each year would be generated.
For Houses Cash Flow, it shows you how much positive cash flow you’d generate. Cash flow from houses increases over time as rents rise and only some of your underlying expenses rising, but others like your mortgage payment stay fixed.
Stocks Versus Nomad Cash Flow – First 12 Years
If we zoom in, we can see a more detailed picture of what is happening with the cash from from both stocks and Nomad early on.
The chart below shows what is happening during the first 12 years as we acquire the first 10 properties with Nomad and as we’re adding the equivalent in down payments and negative cash flow to our stock market investments.
Stocks Versus Nomad Cash Flow – 12th Year – 20th Year
The following chart shows the zoomed in version of cash flow comparing the stock market to Nomad for years 12 through 20.
Yearly Cash Flow on 10 Homes over 40 Years
The chart below shows what the cash flow is on a yearly basis for all the houses over 40 years.
It sums both positive cash and (if any exists) any negative cash flow for any homes owned that year. It does not take into account the tax benefits from depreciation that can improve cash flow. It does include the maintenance reserve for repairs on the property.
The First 5 Years of Cash Flow on All Homes
The following chart shows you what cash flow looks like on all the homes you’ve purchased for the first 5 years.
You’ll notice no cash flow in the first year. That’s because you’re living in the first property.
In year 2, you own two properties, but since you’re living in one, we only see cash flow from the first one.
Estimated Gross Minimum Income Required for Household
Have you ever wonder how much you’d need to be earning to be able to do the Nomad plan? Me too… that’s why we made this chart.
It shows you the absolute minimum you could make and still qualify to do the Nomad model.
If you can find EXCEPTIONAL properties that have significant positive cash flow as a Nomad (that would help you qualify for future houses), the income required would go done over time. If your properties are breakeven or slightly negative (which is more common for Nomads putting little down), the income required will likely increase slightly over time.
This also assumes you have no other debt. If you have debt, you’ll need the income to be able to support that in addition to this amount required to qualify for the home purchase.
Catch Up Nomad for All Houses for Years 20 through 30
The following chart shows you how you’d do for years 20 through 30 comparing investing in stocks versus doing Nomad.
For stocks, it assumes you’re reinviting your returns. For Nomad, it takes into account both cash flow and equity.
Yearly Cash Flow for Catch Up Nomad for All Houses for Years 20 through 30
The following chart shows the yearly cash flow generated from all the houses for years 20 through 30.
It allows you to get an idea of what cash flow might be like if you were doing Catch Up Nomad and relying on your properties to provide cash flow.
Catch Up Nomad – Paying Off Houses
I’m going to be working on make an improved version of this table, but for now I wanted to share the information with you even though it is confusing and hard to follow.
In the tables below, it shows you what would happen if you sold one or more properites and used the proceeds of that sale to pay off one (or more properties).
The tables show the year going down the left side. That’s the year we’re looking at.
Along the top are the houses #1-10 with 3 summary columns: # Free and Clear, # Kept and Cash Flow.
# Free and Clear is the number of houses that you’d own free and clear of a mortgage if you sold off the ones before the lined through ones and used that money to pay off the ones that are lined through. They are the ones lined through.
# Kept is the number of houses that you’ve kept if you did as we suggested that year.
Cash Flow shows the total cash flow you’d generated if you sold the ones we suggest off and paid off mortgages
Catch Up! Paying Off Houses
Year | #1 | #2 | #3 | #4 | #5 | #6 | #7 | #8 | #9 | #10 | # Free and Clear | # Kept | Cash Flow |
11 | $174K | $160K | $133K | $118K | $89K | $73K | $58K | $42K | 2 | 6 | $39,386 | ||
12 | $192K | $179K | $151K | $122K | $107K | $91K | $59K | 3 | 4 | $62,157 | |||
13 | $212K | $184K | $170K | $141K | $125K | $94K | $78K | 3 | 5 | $65,297 | |||
14 | $232K | $204K | $175K | $160K | $129K | $113K | $97K | 3 | 6 | $70,416 | |||
15 | $253K | $225K | $195K | $165K | $149K | $117K | 4 | 5 | $92,788 | ||||
16 | $274K | $246K | $216K | $186K | $154K | $137K | 4 | 6 | $98,846 | ||||
17 | $297K | $268K | $238K | $207K | $175K | $158K | 4 | 6 | $103,086 | ||||
18 | $320K | $291K | $245K | $214K | $197K | 5 | 5 | $124,946 | |||||
19 | $344K | $300K | $269K | $237K | $203K | 5 | 6 | $132,878 | |||||
20 | $369K | $324K | $293K | $244K | $227K | 5 | 7 | $143,095 |
These are the next 10 years.
Catch Up! Paying Off Houses
Year | #1 | #2 | #3 | #4 | #5 | #6 | #7 | #8 | #9 | #10 | # Free and Clear | # Kept | Cash Flow |
21 | $394K | $349K | $302K | $268K | 6 | 6 | $163,838 | ||||||
22 | $421K | $376K | $327K | $276K | 6 | 7 | $175,324 | ||||||
23 | $449K | $387K | $337K | $302K | 6 | 7 | $181,230 | ||||||
24 | $478K | $415K | $365K | 7 | 7 | $208,868 | |||||||
25 | $508K | $427K | $376K | 7 | 7 | $215,134 | |||||||
26 | $538K | $457K | $387K | 7 | 8 | $231,689 | |||||||
27 | $571K | $471K | 8 | 8 | $260,841 | ||||||||
28 | $604K | $485K | 8 | 8 | $268,667 | ||||||||
29 | $638K | $500K | 8 | 8 | $276,726 | ||||||||
30 | $674K | $515K | 8 | 9 | $299,102 |
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