Re: 22 unit—advice needed - Posted by Gregory
Posted by Gregory on October 14, 2003 at 12:31:45:
Okay, I’m not quite an invester yet, but have a B.A. in Finance and am actively researching real estate investing and saving my dollars. Gonna do a quick Analysis on your proposal.
I will assume you purchase this property for $775,000 (which is an even split between $700k and $850k), putting 20% down and financing the property @7%/15 yrs.
Your down payment will be $145,000, and you will finance $580,000 with a debt service of $5,213/mo; or $62,556/yr.
You claim montly income is now $10,200 but you feel it is below market and that you can increase it to $12,000/mo over the next few years. I’m going to be conservative and use the current figure for my analyis.
Monthly Rent: $10,200
Annual Rent: $122,400
Taxes (32%): $1,524
After Tax Profit: $3,239
And when you can/do get the rents up to $12,000 a month, your ROI soars to 7.81%.
2.23% ROI does seem a bit low, but if any of the above changes for the better, your ROI will go up correspondingly. For example, you may get the units for less than $775, or you may qualify for a lower APR on your debt service.
Take this with a grain of salt, but I belive it is a reasonable breakdown of what you can expect.
- National average of expenses is 45% of rental income; this covers taxes, insurance, upkeep, advertising, lost revenue due to non-rentals, and other misc expenses.