How does everyone count rental property when doing their NW calculations? Let me explain a bit.
Right now, I handle it the straight forward way of value - mortgage and add the result to my investments, cash, other assets.
However, a recent thread got me thinking about what percent I am towards reaching FI. The simple calculation is .04xNW/yearly budget. However, this doesn't account for the actual income from the rental property.
So, the question is whether people include net property value in their NW or subtract net income from FI budget, or take yearly net rental income/0.04 to normalize the value of the property to include in NW?
Quick example:
Property value: $100k
Mortgage: $60k
Typical NW contribution: $40k
Possible net yearly rents (profit): $6k
Value of rent (how much investment money would be needed at 4% WR): $150k
In this example, owning rental is the same as having $150k in stocks/bonds but would only contribute $40k to traditional NW calculation.
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