I've been being a landlord for a year since I kept my previous house as a rental property when I moved to a new house down the street in the same city. The house I rented out is a 3 bedrooms townhouse, and I have lived there for 14 years and paid it off so I don't have a mortgage on that property. The current value of our home is approximately $250,000. There is an HOA fee of $318.00 per month, and the property tax is approximately $4800.00/year. The current rent is $1850/month. Since I don't owe any money for this property, it created $14,000 net income over the year.
The property appreciation over the 14 years is pretty much same as the time I bought in 2004 because I bought it for $235,500 in 2004.
I've seen many discussions regarding calculating a cash flow for an investment property comparing monthly mortgage to a montly rent, however, in case you paid off the property and in case it creates $14,000 net income/year, is this a good investment for a 250K property? Your advice would be appreciated! Thanks!
It’s a poor return. You have $250k tied up to genterate a 5% return. Depends on prices in your market but you could likely use the $250k as a downpayment on a multifamily (or two multi’s) and clear much more. Do you want the extra work though?
I have to agree with @Dick Stevens , though depending on the area a 5% cash-on-cash return might be okay.
Do you want to keep that particular property for some personal reason? For example, would you want to move back into it in a few years or give it to your children to move into? It doesn't seem to have enjoyed great appreciation, as you pointed out. If not - and you are more interested in moving into buy-and-hold real estate - then you should sell it and reinvest the proceeds into properties that will give you a higher rate of return.
Thank you! I appreciate your advice!