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Hello,
Pretty new at the calculator (and real estate). Could someone please help me understand why the ROI is so low? Even when you enter a purchase price of $100,000 (which I would think is a steal) the ROI calculated is still only 9%.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
@Joseph Bogorad, put simply, anytime its principal and interest expenses total higher than 50% of its rental income (in this case, 61% at the asking price), you're looking at a probable negative cash flow scenario (given that your other expenses are commonly around 50% of its income). Simple math. [Sure, each property is treated on its own merits].
Btw, 1% is way too little allowance for cap ex, and maintenance, and management!
4% is likely not enough allowance for vacancy either. Please don't underestimate costs! Welcome to BP. Good luck...