Wednesday 4 September 2013

Maths Modelling for property investment

They say the numbers don't lie, Maths and spreadsheet is your best friend in making decisions. Here I am, obsessed with creating and modelling life using numbers and spreadsheet. How can one develop a property investment strategy safely and retires in 20 years? I crunched some numbers to see what could happen.

How do you like a strategy that allows you to replace your salary after 20 years of working.... conservatively speaking. My assumptions are based the following :

a.  Iron rice bowl salary with fixed increment of 5% a year. 
b.  Mortgage downpayment of 20%. 
c.  Nett cash flow of 5%. 
d.  No cash out.
e.  No cap gains.
f.  Interest only loan. (for easy calculation)
g. No vacancy.
h. Increment of 2% rental / year.



Year Base Salary Increment 5% Cumulative Mortgage Payment Passive Income Prop 1 (5% nett) Passive Income Prop 2 (5% nett) Passive Income Prop 3 (5% nett) Cumulative Passive Income Total Loan
1 $50,000.00 $50,000.00
2 $50,000.00 $2,500.00 $102,500.00
3 $50,000.00 $2,625.00 $155,125.00
4 $50,000.00 $2,631.25 $207,756.25 ($200,000.00) $10,000.00 $10,000.00 $800,000.00
5 $50,000.00 $2,631.56 $60,387.81 $10,200.00 $20,200.00 $800,000.00
6 $50,000.00 $2,631.58 $113,019.39 $10,404.00 $30,604.00 $800,000.00
7 $50,000.00 $2,631.58 $165,650.97 $10,612.08 $41,216.08 $800,000.00
8 $50,000.00 $2,631.58 $218,282.55 $10,824.32 $52,040.40 $800,000.00
9 $50,000.00 $2,631.58 $270,914.13 $11,040.81 $63,081.21 $800,000.00
10 $50,000.00 $2,631.58 $323,545.71 ($300,000.00) $11,261.62 $15,000.00 $74,342.83 $2,000,000.00
11 $50,000.00 $2,631.58 $76,177.29 $11,486.86 $15,300.00 $85,829.69 $2,000,000.00
12 $50,000.00 $2,631.58 $128,808.86 $11,716.59 $15,606.00 $97,546.28 $2,000,000.00
13 $50,000.00 $2,631.58 $181,440.44 $11,950.93 $15,918.12 $109,497.21 $2,000,000.00
14 $50,000.00 $2,631.58 $234,072.02 $12,189.94 $16,236.48 $121,687.15 $2,000,000.00
15 $50,000.00 $2,631.58 $286,703.60 $12,433.74 $16,561.21 $134,120.90 $2,000,000.00
16 $50,000.00 $2,631.58 $339,335.18 $12,682.42 $16,892.44 $146,803.32 $2,000,000.00
17 $50,000.00 $2,631.58 $391,966.76 $12,936.07 $17,230.29 $159,739.38 $2,000,000.00
18 $50,000.00 $2,631.58 $444,598.34 ($400,000.00) $13,194.79 $17,574.89 $20,000.00 $172,934.17 $3,600,000.00
19 $50,000.00 $2,631.58 $97,229.92 $13,458.68 $17,926.39 $20,400.00 $186,392.85 $3,600,000.00
20 $50,000.00 $2,631.58 $149,861.50 $13,727.86 $18,284.92 $20,808.00 $200,120.71 $3,600,000.00
Nett Cash Position $349,982.21
Passive Income $52,820.77
Total Mortgage $3,600,000.00
Nett Worth ($3,250,017.79)

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