I am new to the rent to own space and need help understanding the returns on this deal - all detail out how I am thinking:
All in cost w/ rehab: $40,000
Sell Price: $60,000 @ 10% interest amortized over 30 years (expected holding period 36 months).
Option money: $2,000
Gross Rent: $750
Expenses (property taxes and insurance): $100
Net Income: $650
-$100 of $650 toward tenant buyers purchase.
-$550 towards rent.
-----$550 x 12 : $6,600 / $40,000 (all in price) = 16.5% cash on cash return
-----$2,000 / $40,000 = 5% / 3 years = additional 1.6% per year
-------the $20,000 expected profit 50% return on the 40k / 3 years = 16.66%
------ Where I need help is analyzing the other $100 thats going towards the loan but in reality only servicing interest.
So all in with that simple math I am at: 34.76% per year
I guess where I need some help is on that 10% on the loan would I just add that making my total return around 45% per year?
Any other thoughts, anything I am missing?
Sorry for the drawn out explanation just having trouble getting clear on my analysis.
@Jynell Berkshire any thoughts?
Account Closed has experience in rent to own - maybe he could provide some insight?
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