Informed decisions for confident retirement planning.
Eleanor inherited a $1.8M Traditional IRA and $450K in taxable accounts after her husband's passing. She was considering using a portion of her assets to finance the purchase of a rental property to generate additional income. However, with fixed retirement income and limited experience managing rental properties, Eleanor was unsure if she could comfortably service the mortgage debt and maintain a positive cash flow.
Golden Door Asset utilized the Debt Service Coverage Ratio calculator to analyze Eleanor's potential rental income against her projected mortgage payments, property taxes, insurance, and maintenance expenses. The DSCR calculation revealed a comfortable ratio of 1.4, indicating that the rental income would adequately cover the debt service. We also used the Tax Equivalent Yield Calculator to compare the after-tax return on the rental property with other investment options.
We inputted Eleanor's anticipated gross rental income, operating expenses (vacancy, repairs, management fees), and the proposed mortgage details (interest rate, loan term, loan amount) into the Debt Service Coverage Ratio calculator to determine the DSCR. The Tax Equivalent Yield Calculator then helped determine the taxable equivalent yield of an alternative investment.
$12,000 in annual net rental income (after expenses and debt service), providing a stable income stream to supplement her retirement savings.
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