I've bought a house a few years ago with purpose of renting, I've been renting, but now I'm unsure if selling might be a better option since property value is about ~40% up.
Based on this: https://www.shupilov.com/blog/calculate-real-estat...
> ROI= Total gains / capital investment * 100
> Total Gains = Rental net income + value appreciation + mortgage appreciation
I've made some math and I believe I will have a 20% ROI on year for next 5yrs. (I take home ~40% month of rent, after tax, mortgage & expenses)
But when calculating ROI, shouldn't I consider the current property value into the "Capital Investment"? Although I haven't actually invested all of this. And if that's the case my real ROI is 7%.
My idea is, I could sell the property and invest somewhere else the capital and get more than 7% (stocks for example, I know it's a different risk, just doing the exercise), or am doing the math incorrectly?
Sorry for the very newbie questions, I've done this initial investment out of luck almost, but now I'm studying more about how can I improve my gains.
In my opinion, 20% return on your investment is excellent. But, is the 20% based on your down payment, and the 7% based on your "equity" in the home?
Yes you must include appreciated value. It is your money and therefor must earn a return otherwise it is not earning it's keep. Your property has a ROI of 7%.
Time to sell or refinance/pull out the equity to put it to work.