I sold a home 5 years ago and got $500,000 in equity (for example purposes.). Since then I have been renting an apartment (say $3,000 per month) because I have not found a home yet to buy. In the meantime I have the money sitting in a MMIA earning 3.75%.
I would like to model this taxable interest coming in for another year then use the equity to purchase a home (for easy math say $750,000). At that time I would drain my equity account to $0 and purchase the home with a loan of $250,000.
Looking for some workaround tips. Thank you !
@clindgren This is relatively easy to model in Pralana; I wouldn't refer to it as a workaround. Include the $500,000 in either your cash account or taxable investment account initial balance; specify the apartment rent as a miscellaneous expense (Build > Expenses > Miscellaneous); and then specify the purchase of the new home on the Build > Expenses > Property page. If you chose to put the $500,000 equity into your taxable investment account, then you'll also need to specify an asset class called MMIA with a 3.75% ROR and allocate the appropriate portion of your taxable account to that asset class via the Build > Financial Assets > Advanced Portfolio Modeling pages for the period between now and the time you expect to buy the new home, at which time you'd change the allocation of the MMIA asset class to zero. Alternatively, and easier, if you put the $500,000 into your cash account, you'd just need to set the cash account ROR to 3.75% between now and the time you expect to buy the new home and thereafter set it the cash account ROR you expect for the long term to a different value. You can vary the RORs and allocations for different periods of time via the Portfolio Time Periods control on the Build > Financial Assets > Advanced Portfolio Modeling pages.
When the time comes for the purchase of the new home to occur, Pralana will model that purchase by setting up the new mortgage and the down payment of $250,000 will be an expense in that year. That expense will be handled just like any other expense: Pralana will first go to the cash account for the funds (the difference between your income and expenses in that year) and will then follow your specified withdrawal priority to cover the deficit spending to the extent it cannot be covered by your cash account.
Stuart
