How to model home in FRP

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gtam
Posts: 6
Joined: Sun Sep 06, 2020 9:55 am

How to model home in FRP

Post by gtam »

What is the best way to put the value of the home in the model. I already have the mortgage payments in the model. What do most users use as yearly home appreciation?
jimr
Posts: 821
Joined: Thu Feb 28, 2008 6:48 pm

Re: How to model home in FRP

Post by jimr »

If the plan is to stay in the home until the end of the plan, there's really no benefit from including the home in the home since there won't be any cash flows from it.

OTOH, if you plan to downsize to a smaller home or apartment later in retirement, the best approach is usually to create a one-year "other income" cash flow in additional inputs to record the net proceeds from the sale (after subtracting taxes, expenses, and the cost of the downsized home). If the plan is to sell the home and move to an apartment, then creating an "other expenses" entry starting the year after the sale probably makes sense.

Many people like to set up the above downsizing scenario and then compare results before and after just to better understand the impact.
gtam
Posts: 6
Joined: Sun Sep 06, 2020 9:55 am

Re: How to model home in FRP

Post by gtam »

Thanks Jim. That makes sense.

The reason I asked was if the value of the house would impact the Probability of Success result.
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