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Old 08-26-2015, 01:46 PM
 
Location: Buckeye
604 posts, read 798,645 times
Reputation: 1391

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Talk to Renters Warehouse. They'll manage the property, find renters, collect the rent, etc. Flat fee, not a percentage. We were going to use them on a property we had in MN then sold it instead.

Also, look at your return on investment. If it's a $250k place use that as your denominator. Subtract financing costs (if you're giving a mortgage on the property), taxes and maintenance, from your gross annual rent. Divide that net annual rent by 250k. That's your ROI. Appreciation doesn't matter (unless you sell) and I don't use it as part of ROI.

If you like the return on your $250,000 investment go for it. For example, to get 4% you'd have to net $10,000 after ALL expenses.
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Old 09-01-2015, 03:44 AM
 
Location: Chandigarh, India
14 posts, read 11,948 times
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Phoenix and Scottsdale real estate markets becomes more sophisticated & challenging, you need real estate professionals who understand the changing markets, property values
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Old 09-02-2015, 11:36 AM
 
Location: Scottsdale, AZ
1,350 posts, read 1,070,926 times
Reputation: 1925
GeneR, assuming a standard mortgage on a 250K property, then the actual cash out of pocket would only be ~50K or so or whatever their downpayment would be.

If it costs me only 50 thousand dollars to buy and finance a property that returns me 5 thousand a year, just to use simple numbers, that is a very different inevestment scenario than if I plunk down 250 thousand dollars to buy the property outright, and still only return 5 thousand a year.

Given how cheap money has been the last seven years or so, that is what has been spurring so much of the investment activity and led largely to the housing recovery.
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Old 09-02-2015, 02:09 PM
 
Location: Buckeye
604 posts, read 798,645 times
Reputation: 1391
Quote:
Originally Posted by ScottsdaleMark View Post
GeneR, assuming a standard mortgage on a 250K property, then the actual cash out of pocket would only be ~50K or so or whatever their downpayment would be.
Cash out of your pocket is $250,000. Borrowed money is still money invested. You then have to deduct the cost of the rented money from your gross income. To consider a return on only a $50k investment (downpayment) would be a falsely inflated ROI.

Last edited by GeneR; 09-02-2015 at 02:19 PM..
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Old 09-03-2015, 08:18 AM
 
Location: Scottsdale, AZ
1,350 posts, read 1,070,926 times
Reputation: 1925
Quote:
Originally Posted by GeneR View Post
Cash out of your pocket is $250,000. Borrowed money is still money invested. You then have to deduct the cost of the rented money from your gross income. To consider a return on only a $50k investment (downpayment) would be a falsely inflated ROI.
I did some further research to make sure I wasn't "doing it wrong" and it does seem most people use a different methodology (cash-on-cash) than you for calculating rental ROI. I'm not saying you're wrong or I'm right just that I didn't understand your original post because I've always focused on cash-on-cash returns.

The reason cash on cash makes more sense to me is, if I sell the example mortaged rental property, I still have to pay off the mortgage and therefore am left with only my 50K original investment, plus appreciation and minus expenses. What did you put in and what did you get out, basically.

However, if I understand you correctly, your point is that in theory, you can take 200K of leverage and apply it to any investment situation, i.e., my properties cash-flow, but, in theory, could I have achieved better returns on the borrowed money elsewhere? And I am guessing that is why you like to account for the full 250K.

Of course all the various tax implications of owning property complicate things a lot further no matter what formula you're using.

Hopefully I am understanding your point of view correctly.
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Old 09-03-2015, 10:48 AM
 
Location: Buckeye
604 posts, read 798,645 times
Reputation: 1391
Quote:
Originally Posted by ScottsdaleMark View Post
I did some further research to make sure I wasn't "doing it wrong" and it does seem most people use a different methodology (cash-on-cash) than you for calculating rental ROI. I'm not saying you're wrong or I'm right just that I didn't understand your original post because I've always focused on cash-on-cash returns.

The reason cash on cash makes more sense to me is, if I sell the example mortaged rental property, I still have to pay off the mortgage and therefore am left with only my 50K original investment, plus appreciation and minus expenses. What did you put in and what did you get out, basically.

However, if I understand you correctly, your point is that in theory, you can take 200K of leverage and apply it to any investment situation, i.e., my properties cash-flow, but, in theory, could I have achieved better returns on the borrowed money elsewhere? And I am guessing that is why you like to account for the full 250K.

Of course all the various tax implications of owning property complicate things a lot further no matter what formula you're using.

Hopefully I am understanding your point of view correctly.
I believe this is a well thought out comment on my and the poster's positions. Nicely done!
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