Single family residence in Buena Park. 4 bd 2 ba Rentometer says fair market rent is $3900 month. Purchase price is $470,000 and the down payment is $71000. PITI (Principal, interest, taxes, insurance) add up to a payment of $2198mo. budget 15% ($585)for repairs (a little high but a small pad is ok) Total expense is $2783 ( $2198 + $585).
So net rent is ($3900-$2783 in expenses) = $1117 in profit per month. So what's our cash on cash return on investment? = Annual net income of $13,404 ($1117 X 12) divided by cash expense of $71,000= 18.88% return. Homerun. The property appraised for $525,000, I closed it at a purchase price of $470,000. $470,000/$525,000 = 89.5% Loan to value.
Hitting all the notes so far.
I manage the properties myself, a PM will cost you 10% of the rents.
So :
A. 18.88 % ROI (Cash on Cash)
B. Property appreciation is excellent, timing of purchase was good
C. No taxable income as the writeoffs of interest paid, taxes, insurance, depreciation took the taxable income to zero.
D. Increase rents by 5-8% per year ( I increase rents 7% every three years, but i know i could do more. Don't want to , to avoid turnover.
Of course I closed on this deal.
*Note: The analysis in this example should be your preliminary assessment of the investment. If the number look good, you move to the inspection of the property and a more detailed analysis of repairs. Property condition and needed repairs before renting out is critical. Missing a big expense like a roof, foundation issue or miscalculating a cost can become a headache.
That’s a great deal.
Are you asking us if we would make the same play, or are you giving us a free chapter out of your book?