Real Rough
Real Rough
Real Rough
Rough Real estate numbers?
I am comparing the potential profit of investing in rental real estate vs. other investments, and I wanted to sanity check some of my numbers. Do any of these numbers appear out of whack or terribly not-normal.
Assumptions:
Property is not financed, but fully owned
The property can be rented for 6% of value per year.
The property increases in value at the rate of inflation.
The property is vancant 20% of the time.
Expenses are 2.5% of property value per year.
If it is relevant, the property will cost about $200-$250k, probably be a single-family residence, and be located in the Indianapolis area.
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I intend to do most/all prospecting, renter screening, and bookeeping, but plan on outsourcing most home maintenence.
-->Adam
Owning outright is not the best option in my opinion.
Leverage contributes to the overall return,and you didn't mention depreciation on your taxes of the dwelling.
If you have a single family home in a decent area, I'd say that your vacancy factor would be closer to 5%.
Are you saying that a $200K home only rents for $1000 a month ? With a 20% vacancy and no leverage, it's a crappy return.
You can put the cash in the bank with zero risk and compounded, it will prob beat inflation numbers as presented by the govt, but maybe not true inflation.
The beauty of real estate is the leverage, if it pencils out.
Whatever inflation rate that you want to use is fine, say 3%, on a $200K property the $6K increase is the same whether you pay cash for the property or only put 50K down, and finance.
A Diamond in the Rough