Buying 20% Rentals at Various Inflation Rates

Part 10 of Inflation for Real Estate Investors

This series is an EXPANDED VERSION of the new book I just published called Inflation for Real Estate Investors.

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Buying 20% Rentals at Various Inflation Rates

Let’s look at the models for buying 20% down payment rentals at various inflation rates.

In this model, we have them:

• Buy an owner-occupant property with 5% down payment just like we did with the homeowner.

• Then, buy up to 9 non-owner-occupant (investment) properties as rentals as soon as they save up enough down payments based on the same savings assumptions we previously discussed. They do not need to wait a year like they do with Nomad™, but they need to save up enough for the 20% down payment, closing costs and reserves for their personal expenses, this property, and all the previous properties they bought.

For all the real estate modeling, we’re using the same property, but the financing does change when we switch from owner-occupant to investor. Investor loans have higher mortgage interest rates: 7.5% instead of 7.25% for owner-occupants including Nomads™.

Also, since they are putting at least 20% down they no longer have Private Mortgage Insurance (PMI). PMI is required if they put less than 20% down like they are doing with the owner-occupant properties—including Nomad™—that they bought in our previous modeling. We included PMI when they put less than 20% down, but since they are putting more than 20% down now, we exclude it.

Because they now need to save up 20% down payments, closing costs and reserves it takes them longer to acquire the 9 rentals then it did when they were Nomading™.

Here’s a chart showing that (plus a lot more)…