Looking at buying a higher end home for rental. 3100 square feet, 4 bedroom. I would be paying 100% cash.
The details are:
- Costs (taxes, HOA, insurance, maintenance, property management fee): $30,000
- Estimated rental income (assuming 11 months each year): $41,800
- Resulting income: $12,000/year or 1.2% return on investment
The numbers above exclude home deterioration and major renovations/repairs.
In addition to $12,000/year income, I would receive home appreciation. The historical 12 year average for home appreciation in this neighborhood had been 6.2%.
Thus, my total estimated ROI is 7.4%.
Since the money is currently invested in the stock market at around 8-10%, this doesn't sound like a great investment.
Can you double check me?
Considering buying a rental property. Can you check and see if my math works?
byu/Low-Computer8293 inrealestateinvesting
Posted by Low-Computer8293
4 Comments
Are you buying turn key?
1.2% return is not a good deal. I know you wanted to do all cash but have you calculated if you were to get a loan ? That could come out higher ROI on your down payment. This all depends on the interest rate.
If this is your first rental, I would not go for management, do it yourself. Especially if this a high end unit, your tenant will more likely to be reasonable which means less headache for you to manage.
This is such a terrible use of cash my god. The math is right in front of you . And you’re not even gonna self manage it?
spend a couple hundred to join Lifestyles Unlimited and watch their 7 hour single family rental course,
you need to be making alot more profit than that.
a high end home is not a good rental, neither is a low end home.
you want a normal middle class home. that normal people can afford. and you do NOT want to pay full market price for it.
with what youre doing, you can invest in a mutual fund and make just as much or more money