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If you have been watching the real estate market lately, then chances are you are well aware of just how ripe the market is with investment opportunities. In fact, with interest rates as low as they are and prices to match, it is an excellent time to buy and start the income-generating machine today that will yield continued returns tomorrow and beyond.
In this
week’s video, we walk you through an example demonstrating how you can take the
standard ROI formula, apply it to an investment home in our Central Florida
market and come out with a fantastic financial return. Here are some of the key numbers we mentioned
in the video:
How to
Calculate Return On Investment:
Gross Income – Expenses
Investment
Once an
investment home is purchased it is a good idea to list the items that will need
repairing or replacing. After assessing the total amount needed to fix the
place up, as well as the investment needed to maintain the property – you will
be able to quickly calculate the returns.
In our
example, we have a home that needs several things done to get it ready for
renting. Missing appliances, carpet replacement, some water damage and painting
issues to name a few.
Purchase
Price: $81,500
Repairs:
$11,500
Total
Investment: $93,000
Factor
in the monthly gross rental income of $1,000 plus expenses (taxes, insurance
and HOA fees amounting to $9,167) and you get an ROI of 9.8%
To
double or more the ROI, we advise investors use the bank’s money for leverage.
With a
75% LTV cash out refinance, we put that cash back into another investment
property.
The
total loan amount (75% of the $93,000): $69,750
Monthly
payment (including PITI* and HOA): $569.25
Total
Expenses: $6,831
Total
income less expenses: $5,169
Once
again calculating according to the formula and the only investment is the 25%
of the total amount put in for a total of $23,250, resulting in an ROI of 22.2%
(not counting future appreciation).
If you’d
like to learn more about how you can double, triple your investment dollars –
contact us today! We’d be happy to help!
*Principle, Interest, Taxes, Insurance
