What is the value of the money today

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Reference no: EM132750879

Individual (age 25) uses $10,000 saved over the past 3 years (280/mo).

The individual buys a 75,000 townhouse in an okay area. The mortgage is 65K. The individual pays down the mortgage over the next 5 years. The townhouse goes up in value (90K). The individual has saved 15,000 while paying down the mortgage (as there is no more rent and payments dropped slightly, reinvesting in savings for investment). The individual buys a 100K house in an average neighborhood renting the townhouse for more than the mortgage and expense (probably not a lot of income profit for the first few years, though rent increases biannually while paying down the mortgage, literally someone else is paying the mortgage). The individual makes some improvements to the house and lives in the house for 5 years. At age 35, the individual has saved 20,000 for investment. The individual buys 2-75,000 townhouses for rental. The individual reinvests the rents of all three income properties to paying down their debt (@800-1000/mo each and mortgages of 650-750 each). At age 40, the individual invests 25K in a 200,000 house they will keep long term, renting the first house. The first townhouse is 15 years into the mortgage and is paid down significantly. The mortgage has remained fixed, expenses adjusted for taxes and maint, making a small profit as rents have increased over the 15 years. The rental house, the mortgage is below rental value due to improvements and time in the property, producing income. The second and third townhomes are producing a small profit. If the individual continues this pattern for the investment of income properties they will purchase a property every 5 years to age 65 or 5 more properties. The first 2 properties will be paid off if there is a 30-year mortgage. the first 4 properties are paid off if 20-year mortgage plans.

Problem 1: What is the value of the money today if you were the 25-year-old buying the first property for residence then income property? If you are 65 or 70 years old and followed this plan, was this a wise plan that has increased the value of the money invested 40+ years ago?

Reference no: EM132750879

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