Is it worth at all?
Hi all,
I started to analyze my local area here in the Czech Republic (Europe) and found out following information:
1) My city has around 65,000 inhabitants
2) Searching websites I found that there are cca 60 flats selling in my town at the moment ranging from one-room flats (15 sqr meters) to 4-rooms-plus-kitchen flat (143 sqr meters).
3) The prices range from $18,500 for the former to $160,000 for the latter.
4) I was also searching the rental market a bit and it looks like the one-room flats are renting for around $115 - $200 per month (utilities excluded) and the four-room flats are ranging from $400 to $500.
Now, I believe that for the cheapest flats I could get a mortgage for 20 years for 3% p.a. assuming 20% down payment. Still, assuming putting 35% of the rent aside for repairs/maintenance and assuming full occupancy at $200 rent p.m., I am ending up with some $565 of net CF per year which brings me to some 15% cash on cash return.
My question is, is this acceptable amount of profit assuming that there might be vacancies and the rental income will more probably be somewhat lower?
What return are you usually aiming at?
PS: I could probably get even 100% mortgage which would mean that cash on cash would be infinitely high (some $317 per year). In this case, what kind of criteria do you use to assess whether the deal is worth of consideration?
Thanks
Regards
Radek