Planit:Rental Property

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In this Video you will Learn...
How do I properly include a rental property into my client's plan?
• Personal Use asset (and liability)
• Rental income in Pensions & Other Revenues
• Disposition Strategy

Keep on Track! Continue training on...
Investment Management Modular Planning
Life Planning Integrated Planning
Assets and Liabilities Screen

Other Related Topics
Disposition Strategy Add an Asset Introduction to the Assets & Liabilities Screen
Add a Personal Use Asset Add an Account Add a Liability
Liabilities on Death Default Revenues

The material in this video may differ somewhat from what you see on your site due to difference in version, jurisdiction, corporate content or access level. Regardless of these differences most of the core functions are consistent across all sites, so you'll be able to benefit by and large from what you learn in this video.

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Part 1: Disposition of the Rental Property

1) Add a “Business/Other” account selecting Regulatory Type “Rental Property”.


2) On the “Detailed Asset” screen identify the current Market Value of the rental property and the ACB. This allows the disposition analysis to project the gains on ultimate disposition.


3) Identify the liability information. The Initial Loan Amount and Inception Date are optional. The radio buttons allow you to identify if you wish the liability to be paid on death.


4) Use the “Disposition Strategy” the check box to indicate you wish to dispose of this asset in your long term projections. Identify the year when the rental property is to be disposed of. This might be a particular year when the client’s have identified they wish to no longer manage the property, or it may be a point in time when you have identified shortfalls that need to be filled. In the example below the disposition is planned for 2020. Next identify the payout period, which for a rental property will typically be disposed of in one year. Then identify the growth assumption you wish to make on the asset which will be used to project the future value of the asset upon disposition. This might be your assumed inflation rate of another rate as appropriate. Set the death and disability radio buttons to your preferred strategy on death or disability.


5) At this point you can elect to use the “View Report” button to see the projected future value of the asset and its taxable component recognizing the ACB and the future value. In this example the rental property has grown to $391,432 which represents a gain of $141,432 of which 50% is taxable, which means that 18% of the accrued value is taxable.


Here’s the record that’s automatically created on the Pensions & Other Revenues Screen for the disposition of the rental property.


Part II: Paying off Outstanding Debt at time of Disposition

The other half of the equation is to be able to recognize that this $391,432 may not all be free and clear if any outstanding liabilities remain on the property. The first thing to do is use the Debt Consolidation Calculator to identify the loan balance on the targeted disposition date.

1) Go into the Debt Consolidation Calculator. This is accessed from the Assets and Liabilities screen. When you access this, select the loan you wish to view as seen here and click on the Debt Consolidation Calculator button to proceed.


2) This will take you into the calculator and pre-populate the fields from your previous data entry. You’ll see when the loan will be paid off given the current loan details. In this case in 16.3 years. If your planned disposition was more than 16.3 years in the future, then you need go no further since the long term projection will assume the property can be sold with no further debt. However, if your disposition occurs prior to the payout date, which in our case is 2020 (9 years out), then you must go to the next step.


3) Next go to the “Results” tab in the calculator. When you arrive here, you must set the interest rate to be the same as the last screen (Fixed @ 5%). This makes the graph showing the payout date the same as the last screen.


4) Now you can click on the “View Report” button. This will bring a PDF to the screen showing the declining balance on the mortgage. Below you’ll see the balance has reduced to 109,309 after 9 years. You can print the PDF report to retain your projection in your file.


5) Now you need to go to the Objectives screen and set up a goal to pay off this liability in 2020 when the disposition occurs. Note that the index rate is set to zero since the value we are entering is a future dollar number that we do not want to index. Also note that the priority ranking on this goal should be set to #1. This ensures that in cases when a client has a shortfall the auto model doesn’t eliminate this goal.


The result of these steps is the ability to include the disposition of the rental property at a specified point in time and have the taxation on the disposition be accurate given all of the other revenues the client is receiving in the year of disposition. It also ensures that the liabilities are being recognized and paid off from the proceeds of disposition.