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I'm referring to landlords who rent out entire properties. NOT people who are renting out rooms in your primary property or converted a single family home to have an area separate for a renter. I'm specifically referring to anyone who:
Rents out a condo, townhome, duplex, single family home etc. What is your yearly return on your investment (percentagewise)?
Meaning when you subtract all expenses from the rent received (tax, insurance, mortgage etc.) and then you compare the profit to the total amount you have invested in the property; what is your return?
I have two rentals that are returning 11% and 9.7% respectively. But those were bought when the market bottomed. I'm looking at buying another one which will return about 8.4% so I'm trying to figure out if its even worth it. The property prices have gone up a lot in my area in the last year but the rental prices haven't increased in relation. However, I don't think the property prices will drop so I won't lose any of my money that I sink into this property.
But I'm trying to figure out if this 8.4% is anywhere close to what other landlords have ever taken as an investment on a rental (willingly). I have to decide in the next 10 days if I want the property. It will be purchased for 73K which will be my investment into it. I will be getting around $6,072/yr. as a return. What do those with experience in this matter think? Is this at least a decent return on the 73K?
Whew! Thanks for the confirmation. This property is in Broward County FL. Rental profits from properties are about the same in all cities in this County, provided that you buy in a community with low HOA fees.
Those returns are great. I would be watchful of the HOA's finances so that you avoid any huge unexpected assessments and look for ones that are well ran.
You could put that money into your savings account and receive 0.06% on it, instead.
The landlords who are receiving the really high returns are getting them in slums with Section 8. That's not a fun way to make your money. 8.4% is fine and if that is a fixed rate mortgage, the % of return will get better over the years as rents go up and your mortgage costs remain the same. Also, that property value is probably going to keep up with inflation, so that you won't lose spending power over the years.
I think its a great return. My rental properties are more of an appreciation gamble, but I make them all cash flow at about 3-3.5%....Sometimes my market will bear more, but when I have good tenants I keep them. No need to raise rent to raise cash flow. All my rentals are usually tear down or under improved houses in high income, high priced areas...I generally buy land that just happens to have a house I can rent out. I make my real money on appreciation. Rent only rises when I change tenants, get a new tax bill, or see any other increase in cost. My bottom line is 3% ROI - but I am usually looking for 9+% annual appreciation. Ive got multiple properties that are over 150% appreciation in less than 10 years.
Its hard to beat real estate as an investment if you have the fortitude to deal with the problems that arise yourself.
You could put that money into your savings account and receive 0.06% on it, instead.
The landlords who are receiving the really high returns are getting them in slums with Section 8. That's not a fun way to make your money. 8.4% is fine and if that is a fixed rate mortgage, the % of return will get better over the years as rents go up and your mortgage costs remain the same. Also, that property value is probably going to keep up with inflation, so that you won't lose spending power over the years.
Yeah section 8 and taking advantage of the poor is not really my style. I think I can live without a extra few % on my return if it means doing it honestly. Luckily no mortgage on the property, I'm buying cash so it makes things much simpler.
And Marksmu thanks for the insight from your years of experience.
Your return is more than you are stating. You are not factoring in the value of the tax deductions, which is divided by the purchase price, and added to your cash flow profit. If the property is appreciating in value, you take that amount and divide it by the purchase price and add to the returns you have already determined.
I'm referring to landlords who rent out entire properties. NOT people who are renting out rooms in your primary property or converted a single family home to have an area separate for a renter. I'm specifically referring to anyone who:
Rents out a condo, townhome, duplex, single family home etc. What is your yearly return on your investment (percentagewise)?
Meaning when you subtract all expenses from the rent received (tax, insurance, mortgage etc.) and then you compare the profit to the total amount you have invested in the property; what is your return?
I have two rentals that are returning 11% and 9.7% respectively. But those were bought when the market bottomed. I'm looking at buying another one which will return about 8.4% so I'm trying to figure out if its even worth it. The property prices have gone up a lot in my area in the last year but the rental prices haven't increased in relation. However, I don't think the property prices will drop so I won't lose any of my money that I sink into this property.
But I'm trying to figure out if this 8.4% is anywhere close to what other landlords have ever taken as an investment on a rental (willingly). I have to decide in the next 10 days if I want the property. It will be purchased for 73K which will be my investment into it. I will be getting around $6,072/yr. as a return. What do those with experience in this matter think? Is this at least a decent return on the 73K?
I did it for one year and I did not find it profitable. I spent quite a bit of money prepping the place. While the tenant lived there, I had to replace the water heater and there was an issue with the roof that they neglected to tell me. I was able to write off all of my rental income. I actually reported a loss. I am not really sure how investors make money long term. When you sell the property, you have to pay capital gain taxes and they recoup the depreciation benefit. In addition, the property needs to maintained. Unless you receive a large profit each month, I do not think it is worth it.
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