QUOTE (thomasbeyer2000 @ Jul 31 2009, 03:33 PM) While I like your approach .. 8% /year is NOT doable in a flat market if one counts TRUE operating costs of an asset, including realtor commission after a 5 years hold and in-unit upgrades due to wear and tear !!!
Thomas,
here is the last place I bought and with conservative numbers and all expenses. It gives my investor an easy 7% return without any appreciation.
Initial Market Value $ 348,000
Purchase Price $ 340,000
Downpayment $ 68,000
Depreciable Closing Costs $ 1,500
Other Closing Costs $ 3,000
Initial Cash Invested $ 72,500
Month Year
Gross Rent $ 2,400 $ 28,800
Vacancy Losses $ -96 $ -1,152
-colorc-->Operating Income $ 2,304 $ 27,648
Expenses Monthly Annual
Property Taxes $ -149 $ -1,795
Insurance !--fonto:Arial-->$ -75 $ -900
Management Fees $ -240 $ -2,880
Leasing/Advertising Fees $ -41 $ -500
Association Fees $ 0 $ 0
Maintenance ">$ -120 $ -1,440Other $ 0 $ 0
Operating Expenses $ -626 $ -7,515
Net Performance Monthly Annual
Net Operating Income $ 1,677 $ 20,133
!--fontc-->- Mortgage Payments $ -1,159 $ -13,911= Cash Flow $ 518 $ 6,221+ Principal Reduction $ 321 $ 3,855
+ Instant Equity $ 666 $ 8,000
+ Appreciation $ 0 $ 0
= Gross Equity Income $ 1,506 $ 18,077
Mortgage Info First Second
ntc-->Loan-to-Value Ratio 80% 0%Loan Amount $ 272,000 $ 0
Loan Type Amortizing Amortizing
Term 35 Years 0 Years
Interest Rate 3.750% 0.000%
PMI $ 0 $ 0
Monthly Payment $ 1,159.26 $ 0.00
Performance Metrics (End of Year 1)
Rent-to-Value Ratio 0.71%
Monthly Gross Rent Multiplier 142
Annual Gross Rent Multiplier 12
Capitalization Rate 5.8%
Cash on Cash Return 9%
Pre-Sale Return on Investment 39%
Post-Sale Return on Investment 11%
