The following is a recording of James demonstrating some of the capabilities of the Nomad Calculator 3. In it James covers the impact inflation has on your paycheck and expenses when modeling Scenarios.
In the last two scenarios, we covered the full 10 property Nomad strategy. One with a nothing down loan to start, and one with a 1% down payment loan to start.
In this scenario, we will build on the 1% down payment scenario we just covered.
Everything is exactly the same as what we just covered in the previous scenario, except now, after we've purchased our last Nomad property with 5% down payment and moved into that property to live there, we will continue to save money and invest in the stock market. As soon as we have $5,000 in today's dollars in reserves plus enough for a 20% down payment rental property, we will buy another 20% down payment rental property.
We will buy as many 20% down payment rental properties as we can.If you recall from the previous scenarios where we purchased as many 20% down payment rental properties as possible, we end up with more houses, but much lower cash account balances. That's because we're spending the cash on down payments and buying more properties with it.
Number of HousesBy purchasing as many 20% down payment rental properties as we can save a down payment for, we go from buying 10 total properties (9 rentals as an owner occupant property) in the previous Nomad scenarios to being able to buy 20 properties (19 rentals and 1 owner occupant property) in this scenario. You can see the difference in the chart below.
Account BalancesIf we are spending the cash in our accounts on additional down payments, you'd expect the previous 1% down payment Nomad scenario to have a lot more cash invested in the stock market account. You can see in the comparison of the account balances in the chart below that you'd be right. Read More
In the last scenario we did a full Nomad strategy starting with buying the first house with nothing down. In this scenario, we will do a full Nomad strategy except the first property we buy will be with the special 1% down payment loan program we've discussed in previous scenarios.
Number of Houses Purchased
By using a 1% down payment loan, we are able to buy our next houses a little bit sooner than we could in the previous scenario. We still require at least a year between purchases even if we have enough down payment because that is a requirement of getting an owner occupant loan. The following is a chart that shows the number of houses we buy comparing this scenario to last scenario with nothing down on the first house and when we buy each.
In both scenarios, our first house purchase is in month 1. For this scenario with 1% down payment and in the last scenario with nothing down. But the second house purchase in this scenario moves from month 30 in the last scenario to month 34 in this scenario. The biggest gain is buying the next house; the third house moves up to month 85 from month 96. Subsequent purchases are still a few months faster as well.
The difference in our accumulation of money in our stock market account between the two scenarios is slight, but even small hinges swing big doors and, in our model, have significant consequences. Here's a chart comparing the account balances between the two scenarios for the first 10 years.Read More