In our last couple scenarios, we discussed buying a single home to live in while saving about $160 per month (growing with inflation) in the stock market. In this scenario, we're going to add to the model by purchasing a single 20% down payment rental property once we've saved enough money in our stock portfolio.
All the previous assumptions are exactly the same:
- Same $5,000 per month income that increases each month with inflation
- Same personal expenses that also increase with inflation
- You are buying the same house with 0% down payment to live in
- You are investing in the same stocks that give you an 8% return each year
However, with this scenario, once we get enough money in our account to have $5,000 in reserves (inflation adjusted back to today's dollars) plus enough for the total cost to close on a property with a 20% down payment, we will buy a rental property.
For the Nomad Calculator 3, the total cost to close consists of 4 things:
- Your down payment - in this case 20% of the purchase price
- Any rent ready costs - we don't have any in this particular scenario
- Closing costs - which we assume is 1.5% of the purchase price for this scenario
- And minus any seller concessions - which we assume we don't have in this case
In this scenario, when we have an inflation-adjusted $5,000 in reserves, plus the 20% down payment, plus rent ready costs and closing costs, minus any seller concessions in our stock market account, then we buy a 20% down payment rental property. So, when does that happen exactly in our scenario? I'm so glad you asked. Here's a chart showing our account balance for the first 11 years, 132 months.
As you can see in the chart above, we finally have enough, based on our rule in the Nomad Calculator 3, to buy a 20% down payment rental property in month 127. We needed to have over $100,000 in our account to meet our criteria of $5,000 inflation-adjusted dollars, which covers the down payment and closing costs.
Buy a 20% Down Payment Rental Property
So, when we buy the 20% down payment rental property, what do the numbers look like for it? Let's look at those together almost as if we were using the deal analysis spreadsheet we teach classes on. By the way, you can download a copy of the deal analysis spreadsheet here:Read More