Phone: (941) 377-8400
Fax: (941) 378-5863

Examples of ROI on Rental Property

The Beauty of a Paid Off Investment

By R Scott Corbridge, MPM, RMP

Based on actual properties listed on the MLS, current rental values as of 2010 and assuming a 20% down payment.

Property Description Price Rent* Mtg** T&I Mgt*** CF

Apprec.
Year 20****

Southgate 3 bed, 2 bath home $100,000
$950
$480
$136
$133
$201/mo
$223K

 

In this property the cash flow of $201/month can be used for repairs, maintenance or paying down the mortgage in 20 years. Based upon these assumptions (which are designed to be conservative), your initial investment of $20,000 is now worth $223,000. which is a 55% annual return on your original investment. This does not take into consideration tax deductions along the way.

It’s important to note that even if there was 0% appreciation, with the property now paid off and worth what you paid for it, you would still have a 20%/year return on your investment! What is your downside risk? Real estate has never gone down in value over a 20 year period.

It gets even better; Once the property is paid off, it is now throwing off cash which I call a Forever Annuity. If rental rates increase just 2.5% per year over 20 years, this property could become a cash cow earning $1450/month. Again, based upon your initial investment of $20,000, this income of $17,400 would be a return of 87% per year for as long as you own the home (and while it continues to increase in value). Is this a great country or what?

Here are some more examples taken from the current MLS:

Property Description Price Rent* Mtg** T&I Mgt*** CF

Apprec.
Year 20****

Vamo area 3 bed, 2 bath home $94,900 $900 $456 $130 $117 $198/mo $212K
Ridgewood 3 bed/ 2 bath home 109,250 $925 $524 $148 $130 $123/mo $244K

 

Click here for a Return on Investment Calculator
Click here for a Mortgage Calculator

*Based on Constant over 20 years
**30 Year at 6%
***Management + Leasing (prorated monthly), (goes down on renewals)
**** Based on 4% annual (NAR average nationally is 6%)

Sarasota Management and Leasing
70 Sarasota Center Blvd
Sarasota, FL 34240

Phone: (941) 377-8400
Fax: (941) 378-5863

Sarasota Property Management | Bradenton Property Management | Lakewood Ranch Property Management | Sarasota Homes for Rent | Bradenton Homes for Rent | Lakewood Ranch Homes for Rent

Copyright © 2014 Sarasota Management and Leasing. All Rights Reserved.
Property Manager Website powered by PMW | Sitemap