Property Goals

Adding Property Goals

Suppose the client is looking to change their primary residence, purchase an additional property, or renovate one of their properties in the future. In that case, you can use one of the Property Goals on the Profile > Goals > Add Goals> Property goals area. Property Goals include Primary Home Relocation, Investment Property Purchase, Vacation Home Purchase, Land Purchase, and Home Improvement goals.

Additionally, property goals can be added directly to a proposed plan within the Retirement > Analysis module. This allows for an easy comparison of scenarios with different financial goals. For more information on adding financial goals to the Retirement > Analysis module, click here.

Primary Home Relocation

The Primary Home Relocation goal allows you to change the client's primary residence in the future. You can have the client move into a new or existing property. For new properties, you can enter the state of residence (which will generate updated state taxes), year of relocation, and details about the home and financing. You can enter multiple Relocation goals to change the primary residence at different times.

You can also specify what should happen to the existing primary home at the time of sale.

Fields include:

When: This determines the timing of relocation. You can specify a specific year, age, or tie the relocation to retirement or the end of the plan. Use "Never" to remove the goal from the current or proposed plan. Aq
New home: This determines the type of relocation. It can be set to "Inherit property", "Buy a new home", "Rent a home", or "Move into existing home".
Current home: This field determines what happens to the existing primary home. The options are "Sell immediately", "Convert to vacation home", and "Convert to rental home"

The default option is 'Sell immediately', selling the existing property. Any mortgage and home equity associated with the property will be marked as paid, and the net proceeds will be added to the cash flow.

You can also select to convert the primary home to a vacation home or an investment/rental property. If you convert to a rental home, you will be asked to enter information about rental income, expenses, and depreciation. Additional annual maintenance expenses will be added to the annual maintenance value entered on the previous primary home.

If the New home is set to "Inherit Property"

Property value: Determines the value of the property that is inherited.
Location: Determines the state in which the inherited property is located.
When: Determines the timing of when the property will be inherited.
Annual appreciation: This will increase the property value, insurance, and taxes each year once the property is purchased by the amount indicated.
Annual property tax: The amount the client pays in taxes on the property.
Annual tax increase: Indicates the percentage increase for anticipated property taxes.
Annual insurance: The amount of insurance premiums paid for property.
Annual maintenance: Indicates yearly maintenance costs associated with the property.

If the New home is set to "Buy a new home"

Purchase price: This is the total expected purchase price of the property at the time of purchase. This value will not be inflated between now and the purchase year.
Annual appreciation: This will increase the property value, insurance, and taxes each year once the property is purchased by the amount indicated.
Annual property tax: The amount the client pays in taxes on the property.
Annual tax increase: Indicates the percentage increase for anticipated property taxes.
Annual Insurance: The amount the client pays in homeowners insurance. Be careful not to double-count insurance, as other insurance types may cover the property.
Annual maintenance: The amount spent on yearly maintenance or any other housing-related expense they wish to track.
Down payment: The percentage of the purchase price will be paid as a down payment on the property. If the property is purchased outright with no mortgage, set this to 100%.
Term / Interest rate: The expected mortgage parameters on the property.

If the New home is set to "Move into existing home"

You will see a drop-down box that includes all existing properties' names; select the property that the client will be moving into. Existing information from the property, such as mortgage, property tax, and insurance will be continued.

Primary Home Relocation can be used to reflect many different scenarios, including:

  • A client who is renting but looking to purchase a home in the future

  • Client who is looking to move to a bigger house in a few years

  • A client who is looking to downsize / relocate at retirement

  • A client who plans to move into their vacation or rental home

  • A client who is looking to convert their current home into a rental property

Pro-Tip: Is your client looking to move or purchase international property? Indicate the location of the property goal as 'Non-U.S.' If an international property is indicated as the client's primary residence, we will turn off income based tax calculations.

Investment Property Purchase

An Investment Property Purchase can be used to purchase a property that will be used to generate income in the future.

In addition to the fields discussed above under the Primary Home Relocation goal, under the Investment Property, you can enter the following information:

Acquisition type: Specify if the client is purchasing, inheriting, or converting the property. Converting will allow you to convert an existing real estate property into a new property type.
Monthly rent: Monthly rental income generated by the property
Rent increase: The year-over-year percentage that the rental income is expected to increase
Vacancy rate: The portion of the year the property is scheduled to be vacant, i.e. not generating any rental income. The annual rental income for the client will be calculated as (Monthly rent 12) (1 - Vacancy rate).
Annual maintenance: Total deductible maintenance costs for the property.
Year of sale: The year that the property is to be sold. If the property is not expected to be sold during the client(s) life(s), set the Year of sale to "End of both plans".
1031 Exchange: This feature allows users to sell an existing property and purchase a new investment property without paying taxes on gains from the original property. Tax on gains will be deferred until the second property is sold. If a property is selected in the ‘1031 exchange’ drop-down, it will be automatically sold in the year that the new property is purchased, and the capital gains will be deferred to the new investment property.
Note: If the value of the original property is greater than the new property, clients pay capital gains taxes on the difference.

Vacation Home Purchase

A Vacation Home Purchase goal can be used to purchase a vacation home, 2nd home, or any other property that is not expected to generate income for the owner.

For more information about any fields on the Vacation Home Purchase goal, see the discussions above under Primary Home Relocation and Investment Property Purchase.

Land Purchase

A Land Purchase goal can be used to purchase land at a future date within the financial plan. Users can indicate expenses and income associated with the property, similar to an investment property. The land will be included with investment properties in the Retirement > Cash Flows. Expenses, taxation, etc., will be treated similarly to an investment property, with the distinction that land does not allow for depreciation.

Home Improvement Goal

This goal simulates future home improvement costs that can increase the value on a linked house. The goal amount is deducted from cash flows in the specified year, while the "added value percentage" of the goal amount increases the linked property's value. The "added value percentage" allows the property value to increase by a different amount than the home improvement cost.

The home improvement goal will also increase the cost basis, used to calculate capital gains when the property is sold, by the goal costs.

Example: A home improvement goal of $50,000 on the primary home is entered. Clients indicate that the added value percentage is 80%. Therefore, a $50,000 expense will be seen in future cash flows, and the linked home’s value will increase by $40,000. The home’s cost basis will increase by $50,000.

Using Additional Loan Types

Future property purchase goals allow you to input the down payment amount, interest rate, and term for a standard loan within each data card. Simply enter 100% in the down payment field to pay outright for a property purchase. To use other loan types to fund the purchase, enter 100% in the down payment field, then visit Profile > Income > Add Income> Other Income > New Loan Income. The new data card will allow you to enter and link the new loan type to any future property purchase goal.

Illustrating Changes to Property Goals

You can illustrate changes to the purchase year of any Investment Property Purchase or Vacation Home Purchase goal under the Action Items section on the Retirement / Analysis screen. The goals will automatically display under the "Properties and Businesses" section, under "New property purchases":

You can change the year of purchase to any specific year or either client's retirement year. If you want to show a plan where the property purchase is not included, set the purchase year "Never".

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