Today on Beginner Investing I wanted to give you all a glimpse at a tool I have grown to love. I came across this calculator a few days ago and my heart fluttered. Being a major number cruncher, this little application was right up my alley.
Here is a break down. You put in the purchase value, down, taxes, expected rental income, management fees, etc. and you get back a list of statistics that show you the value of the investment. For example, those who have been reading this blog are aware that I am looking at finding a way to turn my current home into an asset instead of hounding me as a pocketbook draining liability.
If I punch in the following: 190k price, 0 down, 500 insurance, 2000 taxes, 1100 rent, 6.55 interest rate, 300 for fees/maintenance, 3% increase and inflation, and leave the appreciation at 1% (negligible for a cash flow calculation) then I get the following information (note that year one is always the worst because rents get raised annually):
Cash flow (pretax): -7384 (holy hell that sucks)
But wait, I get tax breaks right?
Tax Saved (returned from write offs): 1734 (not much but its something)
This means that after taxes I have a post tax break annual cash flow of: -5650 (-470/month)
In other words, if I rent out the property at the market rate and have a management company handle it for me, then I lose 470$ a month! F-that!
Oh, we aren’t done yet. Phew. Part of those mortgage payments are actually against the principle, which means it comes back to me when I pay off the loan. That amount? 2039$
So my real annual cash flow is 2039-5650= -3611 or -301/month. Well that hurts. Though if you read my earlier posts you know that living in my home I’m losing closer to 810 a month. So renting out my place would save me 500/month. But then I would have to rent or purchase another place.
Regardless, before I get too far off track, the point is this. Say I can bump that rent up by 100$ a month the first year. My yearly cash flow comes to: -184/month!
And 1300 rental? -13/month!!! This calculator really lets you break down scenarios fast!
I highly suggest all of you play around with this little beauty. I couldn’t stop running numbers all day the day I found it 
Oh and remember, I was NOT counting appreciation. As far as I am concerned appreciation cannot be counted on and remains unpredictable. If you buy property that has positive cash flow, you can guarantee that (almost) and look at appreciation as pure bonus. A very, VERY nice bonus
You can find the calculator HERE. Or just look for it on my Utilities links to the far right.
Catch you all next time on Beginner Investing!
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