Rental Property Investor · Visalia, CA · Member since 2019 · 1 post · 0 votes
I own a single family residence. It’s my first home and we will be looking to move soon. I’d love to keep it as a rental to start my real estate portfolio but am new to this and don’t know what numbers to run to evaluate this decision. Is there a formula or collection of metrics to calculate that is often used? I’m sure these are market specific to some degree but how do I learn which numbers matter most?
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
You've already purchased the home and I presume have a loan in place? If so, the main thing I would consider is if the rental rate would cover the mortgage, insurance, property taxes and reserves for cap ex, maintenance, etc. If you have to "add in" money every month, sell the house.
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
@Filip Grace Check Zillow and find out what it’ll rent for. Takes 2 minutes. If that number is is 1% of what you paid.... you’re golden. For a situation like yours, with I presume very little cash in, is he ok if the rent was $300 more than the mortgage. I’d rent is $100-200 over the mortgage and there is equity (you owe less than it’s worth) I’d probably sell and keep the cash since you won’t have to pay capital gains, assuming you’ve lived in it for 2 years.
If you live in somewhere crazy like NYC or San Fran all of these ideas are totally different. If you’re in Coffeeville, KS you’re GTG.
The most important thing in all of this is simply learning all of these rules and how they work. As an investor, that’s your job description.
1. Start with figuring out your expenses (taxes, maintenance, insurance, any utilities or landscaping, any loan payments, etc.)
2. Scope out the going rent rates in your area (Zillow, Craigslist, and Trulia will give you a good idea)
3. Subtract your expense from your projected rent income to get your cash flow.
Then: - If the cash flow is negative this isn't a good move and it would be better to sell the property and invest in something else, unless appreciation is shooting up in the area.
- If the cash flow is positive, calculate your annual ROI by dividing the net annual income by the amount of money you have in the property. Use this number to compare it to other investment options and decide if you want to keep the property or if something else is better.