All ModelsWyomingIs it better for Nomads™ to get a 5% discount when buying or get 5% better rents?

Is it better for Nomads™ to get a 5% discount when buying or get 5% better rents?

As a Nomad™, is it better to focus on finding a property you can buy at a 5% discount? Or, is it better to focus on finding a property where you can get 5% better rents? Explore this comparison as we model it across the US in over 300 cities.

Comparison Summary

Metric 5% Discount 5% Higher Rents Difference % Better/Worse
Net Worth at 40 Years $13,204,090 $13,039,041 $165,048 1.3%
Short $ -$8,183 -$9,632 $1,449 -17.7%
# Properties 9.4 9.3 0.1 1.4%
MTMIR Achieved 484.4 478.8 5.6 1.2%
Risks
Ave Total Rent Resiliency % 39.7% 40.6% -0.89% -2.3%
Ave Total Price Resiliency % 72.02% 70.32% 1.7% 2.4%
Ave Debt-To-Income 27.27% 28.36% -1.09% -4.0%
Ave Debt-To-Net-Worth 42.9% 48.18% -5.28% -12.3%
Ave Debt-To-Account-Balance 150.36% 152.99% -2.63% -1.8%
Ave Months Of Reserves 947.4 991.6 -44.2 -4.7%
Metric 5% Discount 5% Higher Rents Difference % Better/Worse
Net Worth at 40 Years $10,383,460 $9,874,520 $508,941 4.9%
Short $ $0 $0 $0
# Properties 10 10 0
MTMIR Achieved 473 477 -4 -0.9%
Risks
Ave Total Rent Resiliency % 38% 38% 0%
Ave Total Price Resiliency % 72% 69% 3% 4.2%
Ave Debt-To-Income 28% 30% -2% -7.1%
Ave Debt-To-Net-Worth 44% 49% -5% -11.4%
Ave Debt-To-Account-Balance 132% 121% 11% 8.3%
Ave Months Of Reserves 458 486 -28 -6.1%

For Risks, we are measuring the average of that risk for the entire Scenario for that city. The Average or Median option at the top of the table is whether we take the average of all the averages for all cities or the median of all averages for the cities. Average tends to skew values (high or low). Median tells us the middle most.

Achieving Financial Independence

Between 5% Property Price Discount While Nomading™ (5% Discount in the chart below) and 5% Higher Rents While Nomading™ (5% Higher Rents), which one gets you to financial independence faster?

Let's look at Financial Independence first, then we'll move on to Net Worth.

  • In 5% Discount, 3 never achieved financial independence.
  • In 5% Higher Rents, 2 never achieved financial independence.
  • There were 2 where BOTH never achieved financial independence regardless no matter which scenario.

Financial Independence

The following did not achieve financial independence and are therefore not shown in the chart above:

  • For 5% Discount 3 cities never achieved financial independence.
  • For 5% Higher Rents 2 cities never achieved financial independence.

How Much Faster to Financial Independence vs Property Value

Is the difference in how long it takes to be financially independent (Lean FIRE), really about how expensive the properties are in that market?

  • Is it generally faster to be financially independent in less expensive real estate markets with these two strategies?
  • Is it faster in more expensive markets?
  • Does it not really matter if the market has expensive or less expensive properties?

Mouse over each data point to see the city and state being plotted.

Net Worth

Now that we've covered and compared financial independence, let's next look at how they compare for net worth.

  • For 5% Discount:
    • Average Net Worth at 40 Years: $13,204,090
    • Median Net Worth at 40 Years: $10,383,460
  • For 5% Higher Rents:
    • Average Net Worth at 40 Years: $13,039,041
    • Median Net Worth at 40 Years: $9,874,520
  • 5% Discount has a $165,048 better Net Worth at year 40 on average. That's 1.25% better.
  • 5% Discount has a $508,941 better median Net Worth at year 40. That's 4.9% better.

IMPORTANT NOTE: The net worth numbers above are 40 years in the future, so they're in inflated, future dollars. If you assume a 3% inflation rate, they'd be about 1/3 of the values shown if we adjust back to today's, uninflated dollars.

How Much More Net Worth vs Property Value

Is the difference in how much more you have in net worth really about how expensive the properties are in that market?

  • Do you have higher net worth in less expensive real estate markets with these two strategies?
  • Or, is it higher in more expensive markets?
  • Does it not really matter in terms of net worth if the market has expensive or less expensive properties?

Mouse over each data point to see the city and state being plotted.

Negative Account Balance

In some cities, it is possible that by purchasing properties with negative cash flow, they run out of money (have a negative account balance). I might refer to this as being short on money to utilize that strategy.

  • For 5% Discount:
    • Average Negative Balance: -$8,183.13
    • Median Negative Balance: $0
  • For 5% Higher Rents:
    • Average Negative Balance: -$9,631.81
    • Median Negative Balance: $0
  • 5% Discount has a $1,448.68 better (lower) negative balance on average. That's -17.7% better.
  • Same median negative balance for both variations.

What's Better?

The following are special reports answering a specific comparison question of exactly TWO different  Models.

These special reports answer questions about what's better like: is Nomad™ better than putting 20% down? Or, how big of a difference does getting slightly better rent make?

Check out these what's better reports:

Single Strategy Special Reports

The following are special reports that show how a single specific  Model (Nomad™, buying 20% down rentals, buying properties as a real estate agent, etc) performed across all the different cities we modeled.

These special reports answer how does this strategy do questions like: does Nomad™ work only in certain markets? Which ones?

Check out these how does this strategy do reports:

  • 5% Lower Rents While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you are only able to get 5% lower rents.
  • 5% Higher Rents While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you are able to get 5% higher rents.
  • 10% Property Price Premium While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except forced to buy properties at a 10% premium.
  • .5 Worse Interest Rate While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties with a .5 worse/higher mortgage interest rate.
  • Nomad to Short-Term Rentals with 75% Higher Rents - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you utilize a short-term rental strategy after moving out and are able to get 75% higher rents but with doubled maintenance expenses as well.
  • 10% Property Price Discount While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties at a 10% discount.
  • 5% Property Price Premium While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except forced to buy properties at a 5% premium.
  • Nomad to Short-Term Rentals with 50% Higher Rents - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you utilize a short-term rental strategy after moving out and are able to get 50% higher rents but with doubled maintenance expenses as well.
  • 10% Less Job Income While Nomading™ - Buy up to 10 owner-occupant properties using the Nomad™ real estate investing strategy but model it with the investor earning 10% less income than in the Baseline Nomad™ Scenario.
  • Nomad to Short-Term Rentals with 25% Higher Rents - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you utilize a short-term rental strategy after moving out and are able to get 25% higher rents but with doubled maintenance expenses as well.
  • 10% Higher Rents While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you are able to get 10% higher rents.
  • Nomad™ Start with $0 - Do the traditional Nomad™ strategy except you start with $0 saved up.
  • .25 Better Interest Rate While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties with a .25 better/lower mortgage interest rate.
  • 10% More Job Income While Nomading™ - Buy up to 10 owner-occupant properties using the Nomad™ real estate investing strategy but model it with the investor earning 10% more income than in the Baseline Nomad™ Scenario.
  • 25% Down Payment Non-Owner-Occupant - Buy 1 owner-occupant property with 5% down then up to 9 non-owner-occupant properties with 25% down payments.
  • Nomad™ and Sell ALL Rentals if SWR Achieves FI - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except sell all the rental properties if by doing so you can invest the proceeds and achieve financial independence utilizing a Safe Withdrawal Rate of the money you have invested.
  • Baseline Nomad™ Scenario - Buy up to 10 owner-occupant properties using the Nomad™ real estate investing strategy.
  • 10% Property Manager While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except hire a professional property manager costing 10% of gross rents.
  • Buy Non-Owner-Occupant All Cash As Renter - Save up and buy up to 10 non-owner-occupant properties all cash (without any mortgage) while you remain a renter the entire time.
  • 3% Property Price Discount While Nomading™ as Real Estate Agent - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except as a real estate agent you take your 3% commission as a discount off the purchase price.
  • Nomad™ and Payoff OO if Achieves FI - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except payoff your owner-occupant property if by doing so that means you achieve financial independence.
  • 20% Down Payment Non-Owner-Occupant - Buy 1 owner-occupant property with 5% down then up to 9 non-owner-occupant properties with 20% down payments.
  • Buy Non-Owner-Occupant All Cash - Buy 1 owner-occupant property with 5% down then save up and buy up to 9 non-owner-occupant properties all cash (without any mortgage).
  • 3% Commission While Nomading™ as Real Estate Agent - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except as a real estate agent you earn a 3% commission with each property you purchase.
  • .25 Worse Interest Rate While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties with a .25 worse/higher mortgage interest rate.
  • Nomad™ and Sell SOME Rentals to Payoff Others if FI - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except sell some rental properties if by doing so you can payoff the others and achieve financial independence primarily from free and clear cash flow.
  • 5% Property Price Discount While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties at a 5% discount.
  • 10% Lower Rents While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except you are only able to get 10% lower rents.
  • No Real Estate, Invest in Stocks - Save up and invest in stocks while you remain a renter the entire time. Do not buy any real estate... owner-occupant or investment.
  • .5 Better Interest Rate While Nomading™ - Buy up to 10 owner-occupant properties utilizing the Nomad™ real estate investing strategy like the Baseline Nomad™ Scenario except able to buy properties with a .5 better/lower mortgage interest rate.
  • Pay off mortgages early when Nomading™ with any excess cash. - Do the traditional Nomad™ strategy except you pay off the lowest balance mortgage early with any excess cash.
  • 25% Down Payment Non-Owner-Occupant as Renter - Buy up to 10 non-owner-occupant properties with 25% down payments, but never buy an owner-occupant property. Remain a renter instead.
  • 20% Down Payment Non-Owner-Occupant as Renter - Buy up to 10 non-owner-occupant properties with 20% down payments, but never buy an owner-occupant property. Remain a renter instead.
  • Pay off mortgages in full early when Nomading™. - Do the traditional Nomad™ strategy except you pay off the lowest balance mortgage early but only when you can pay off the entire balance in full.