My question is primarily aimed at seeing if anyone knows of papers on something like this. I couldn't find anything like this w/ google, but it seems like a topic someone would have written a paper on. But I have no idea how they would describe it.
I'm currently managing other commercial properties so quite familiar w/ the issues that entails. I really just want to optimize where the money comes from. At a small scale I don't think optimizing more helps. Unanticipated maintenance will just make the calculations irrelevant. I *know* I will have unanticipated maintenance, I just don't know what, when and how much. Reg --- On Thu, 11/15/12, Jeffrey Kantor <[email protected]> wrote: From: Jeffrey Kantor <[email protected]> Subject: Re: [Help-glpk] A financial optimization problem To: "Reginald Beardsley" <[email protected]> Cc: "glpk" <[email protected]> Date: Thursday, November 15, 2012, 9:00 AM I don't have time right now to provide much help, but I do something much like this on occasions when making personal financial decisions. It's very useful and helps significantly with the bank when explaining why you're doing something outside of their general experience. Based on your brief description I'd offer a few suggestions: a. Consider using the present value of net worth as your optimization objective. Minimizing tax and debt service implies that your investment decision has already been made and its only a question of how to finance. b. Develop plausible scenarios. Looks like you have a nominal scenario in mind. What can go wrong and what would be your recourse? You don't need a lot of scenarios, just a few that representing downside risk such as failure to realize the full income. c. You'll need to model the before and after-tax value of the IRA. Real estate also provides some tax benefits if you can deduct interest payments or shelter capital gains. You'll want to provide a common foundation for comparing alternatives which circles back to point a above. d. Include an extra cash flow in the model to maintain future financial flexibility. You'll want to retain some cash flow for the inevitable but presently unknown extras that come with these kinds of investments. Whatever you think you need consider doubling or tripling it. Trust me on that one. Jeff On Wed, Nov 14, 2012 at 6:02 PM, Reginald Beardsley <[email protected]> wrote: Can someone point me to information on how to setup the following optimization problem? It seems to me a not unusual problem and there are a lot of smart people who follow this list. I'm interested in buying an income producing property. I currently have the purchase price in an IRA from which I can withdraw money w/o penalty. However, I will have to pay income tax on what I withdraw. An option would be to borrow money and then withdraw money from the IRA to pay off the loan. Given: current income rental income from acquired property tax rate schedule withdrawal rate interest rate repayment schedule Minimize: sum of tax & debt service Thanks, Reg _______________________________________________ Help-glpk mailing list [email protected] https://lists.gnu.org/mailman/listinfo/help-glpk _______________________________________________ Help-glpk mailing list [email protected] https://lists.gnu.org/mailman/listinfo/help-glpk
