Ep 9 Advanced: Norm and Norma Buy 10 25% Down Payment Rental Properties
Advanced Real Estate Financial Planner™ Podcast
Welcome to the Advanced Real Estate Financial Planner™ Podcast. I am your host, James Orr. This is the advanced analysis of Episode 9.
In Episode 8, Norm and Norma opted to rent a place to live for themselves. They then saved up 20% down payment and bought a rental property. They repeated this until they owned 10 rental properties that they bought with 20% down payments.
In this episode they opted to get a slightly better interest rate and borrowed less on each mortgage by putting 25% down to acquire 10 rental properties.
Variable Returns
In the simple analysis we used fixed assumptions for property price appreciation, rent appreciation, stock market rate of return, inflation rate and mortgage interest rates.
For the advanced analysis we’re using the same random rates of return we’ve used in previous advanced analysis. Specifically:
Property Price Appreciation Rate: Set the new property price appreciation to be -10% to +16% with a standard deviation of 3 and a .1 step value. Average about 3% per year.
Property Rent Appreciation Rate: Set the new property rent appreciation to be -10% to +16% with a standard deviation of 3 and a .1 step value. Average about 3% per year.
Mortgage Interest Rate: Start at 6.5%, but add/subtract to it from -.5% to +.5% with a standard deviation of .125 and a .125 step value. Hard minimum of 2.5% and a hard maximum of 18%.
Stock Market Yearly Rate of Return: Set the new yearly rate of return to be -16% to +32% with a standard deviation of 8 and a .1 step value. Average about 8% per year.
Inflation Rate: Set the new inflation rate to be -3% to +9% with a standard deviation of 2 and a .1 step value. Average about 3% per year.
How will these variable rates of return impact their plan to buy ten 25% down payment properties?
Financial Independence
In the static assumptions version of Episode 9 on the Real Estate Financial Planner™ Podcast, Norm and Norma achieved financial independence in just under 29 years… in month 346.
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