Smart strategies for a secure financial future.
The Johnsons, with a combined income of $450,000 and $2.1M in retirement savings, wanted to purchase a rental property valued at $850,000. They were concerned about taking on additional debt while ensuring they could comfortably fund college for their three children and maintain their retirement contributions. Their primary concern was accurately assessing if the rental income would adequately cover the mortgage, property taxes, insurance, and potential maintenance costs.
Using the Debt Service Coverage Ratio Calculator, the Johnsons were able to project the rental property's income against its expenses. After inputting projected rental income of $6,000/month and total monthly debt service of $4,500, the calculator showed a DSCR of 1.33, indicating sufficient cash flow to cover the debt. Further analysis using the Times Interest Earned Ratio and Tax Equivalent Yield calculators helped them understand the investment's profitability and tax implications, allowing them to confidently proceed with the purchase.
The Debt Service Coverage Ratio Calculator allows users to input various income and expense figures to determine the DSCR. Companion calculators were used to assess the overall return on investment and tax advantages.
$250,000 in projected rental income over ten years, after accounting for expenses, helping accelerate their retirement savings and college funds.
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