Going into the unknow with your first rental property may be a scary first step.
Just like a child when they take their first step they usually have a loving parent close by to make sure that they don't fall flat on their face. When buying your first rental property you want to make sure that taking that first step you don't fall on your face. We want to assist you in some serious answer and questions that you need to consider, it's called the "four step" method. This is how it works.
For example your Dulex Purchase Price is $575,000.
Rental Income $1,200.00 x 2
Total Monthly Income = $2,400.00
2. COMMON EXPENSES
- Lawn/Snow Care
- Vacancies (5% based on Purchase Price)
- Repairs ($100 approx)
- CapEx ($100 approx new roof etc)
- Property Manangement (10% approx)
Total Common Expenses = $1,910 (approx)
3. CASH FLOW
Income $2,400 - Expenses $1,910 = Total Monthly Cash Flow $490.00
4. CASH ON CASH ROI
- Down Payment (20% approx)
- Closing Cost ($3000.00 approx)
- Repair (Repaint & Clean up $7,000 approx)
Monthly Cash Flow $490.00 x 12 = $5,880 per year
Annual Cash Flow $5,880 = 11.76%
Total investment $50,000
Cash on Cash ROI = 11.76%
That is how you analize the four square method for investing on rental properies.
Now the question becomse is a 11.76% cash on cash return good? This is going to depend on your goals, strategy and what else your going to do.
Let's say you could stick your money into the stock market today and know you can make 20% (fairly unlikely), then 11.76% isn't as good. But let's say your earning 6% on your stock then investing in rental propery makes sense.
Contact Jean 613-614-3025 to take that first step into Investing in Rental Properties.