Monthly Cash Flow Question

[Jenna Banaitis]

Hi, 

We are currently looking at a duplex in our area and would clear $350 a month, after Principal, interest, taxes and insurance.   How do I know if this is a good number? What is the rule of thumb? This property is in pretty good shape, built in 1987 so I can't forsee any major expenses right away.  I should also say, this is on a 15 year fixed.  We hope to have all our properties paid off by 55 hence the 15 year. Thanks!

[Amanda Whiteley]

Monthly Rent * 12 months = annual revenue

Annual Revenue * .60 = Rev less expenses for vacancies repairs and taxes (set aside 40% for vacancies repairs and taxes)

Take your last Rev # and divide that by the purchase price of the home, that is your ROI

Here is an example

600 in rent per month * 12 = $7,200

$7,200 * .60 = $4,320

$4,320 / $45,000 = 9.6% return