Updated almost 4 years ago on . Most recent reply
Fair Market Rent vs Mortgage
Hello and thank you all for your knowledge and time.
Is it normal now for Mortgage to be more than fair market rent? When purchasing with less money down, mortgage insurance, compounded home insurance and property tax is included in the first year increasing monthly mortgage.
How is fair market rent really determined?
When mortgage costs $1,300 more than fair market rent how would you guys go about this? I understand I would be building equity in the home but not cash flowing. I would instead be paying for part of the mortgage.
Thank you,
Jacqueline
Most Popular Reply
- Real Estate Broker
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If your mortgage is higher than the rent, you made a bad investment. The only way you'll make income is if you hold onto it long enough that the rent essentially doubles or the value of the property dramatically increases.
As a general rule of thumb, you want rent to be almost double the mortgage. You pay the mortgage, taxes, insurance, and then set aside approximately 10% for vacancy, 10% for maintenance, 10% for capital expenditures (big ticket items like roof or HVAC). What's left over is your cashflow.
You must educate yourself on how to analyze deals and calculate cashflow:
- Nathan Gesner
