Guys, I've been looking at some properties for investment, specifically to rent out. This would be my first and I want to start small to mitigate risk and to learn the ropes. Assuming I've done all the research on the area, why the price is what it is, how much work is needed, etc, assuming I have plenty of cash reserves to handle a down year or a major expense (like a new roof), and assuming I want to take a very conservative view of the earnings potential (I'm not thinking about appreciation or other factors that will impact the value) , can y'all take a look at my numbers and tell me what you think?
1.) Am I calculating all the right things or missing something?
2.) Would you consider it a good move?
For #2, my quick thoughts: on the most conservative side (regular expenses, low occupancy), returns are negative or insignificant at best and obviously index funds would be safer, more profitable, etc. However, if fortunate enough to get a long-term resident and can avoid constantly doing repairs, then the upside (as a percentage) is huge. I would hope over a long enough period to average these out. And, though I'm not considering it in these numbers, there is potential for decent appreciation due to some things I know about the area in question--namely private investment that will spur a lot of job growth.
Anyway, the numbers and thanks!
Purch Price $40,000.00
Down + Expenses $11,200.00
Mortgage princ $30,000.00
Rate 4%
Month P/I $143.00
Taxes $66.67
Insurance $50.00
Total Mrtg Pay $259.67
Maintenance $200.00
Total Month Exp $459.67
Rent $650.00
With Maintenance
Occupancy 60% 70% 80% 90% 100%
Total In $390.00 $455.00 $520.00 $585.00 $650.00
Gross Profit -$69.67 -$4.67 $60.33 $125.33 $190.33
Yearly -$836.00 -$56.00 $724.00 $1,504.00 $2,284.00
Return -7% -1% 6% 13% 20%
Without Maintenance
Occupancy 60% 70% 80% 90% 100%
Total In $390.00 $455.00 $520.00 $585.00 $650.00
Gross Profit $130.33 $195.33 $260.33 $325.33 $390.33
Yearly $1,564.00 $2,344.00 $3,124.00 $3,904.00 $4,684.00
Return 14% 21% 28% 35% 42%
