Accidental Landlord and liking it so far

[Vijay H.]

Hey folks, I couldnt sell my house during the 2011 downturn and ended up making it a rental. So far it seems OK, trying to find out more info as to how it compares with folks experience here and how to really analyse the return on this and decide whether to continue renting it out or sell. 

Any advice/pointers are appreciated

[Thomas S.]

Your expenses will be in the 50% range give or take on a SFH. Statistics generally do not lie.

Your mistake is in believing expenses are attributed to the year they are incurred. What may have happened over the past 5 years has very little to do with the next 20 years. When calculating expenses they are spread over the expected life of the repair. You did not have a negative year two years ago because the cost of a roof is spread over a 20-25 year time line. Same goes for all future repairs. You spread the cost over the entire time you own the property in calculating cash flow. This is the theory behind estimating a percentage on expenses. You have no idea what a tenant is going to destroy next or what major repair is just around the corner.

If you want to be and investor don't think like a home owner. Do not pay off the mortgage instead pull out the equity and reinvest, Money tied up in equity is dead and not earning it's keep. If you want to be a successful investor you need to understand how money works for you.