Purchase Price = $150,000
Down Payment = $30,000
Mortgage = $120,000 ( payment with insurance/taxes = $808 )
Rent = $1100/month
End of year 1:
Total Income = $13,200
Mortgage/Tax/insurance = $9,696
Profit = $3,504
Reduction in principle = $2,101
Total profit = $5605
ROI = $5605/$30000 = 19%
Of course, i would love to buy houses for 50k and flip for 150k.. but that's not going to happen in metro atlanta.
@Alan Hicks Do not forget about:
- Cap Ex
- Other (Property Manager, Utilities, etc.)
@Alan Hicks Here's what does happen in the Atlanta metro area: break/fix maintenance, vacancy, cap-ex, owner-paid utilities, evictions, etc. I'm being a little glib but it's just to underscore (as @Steve DellaPelle points out) that your "Profit" isn't your profit. There's a good chance that this property will be cash-flow negative over the course of ~5 years with the numbers that you've provided.
I just sold one of my properties.
Purchase = 90,500
Sold ( 3 years later ) = 133k
But I also have a rental from 2005
Mortgage = 808
Rent = 700
Been doing that for 12 years... yes.. I pay 108 per month.
ROI is 11%. It's not bad if the renter always pays, nothing breaks, insurance or taxes never go up. I think you over paid. This is a great time to sell it and buy a better deal.
11.7% cash on cash isn't bad assuming it's self managed and occupied with no issues. This is more an appreciate/debt reduction play. If the area is appreciating, you may make a good return on the sale.