Figuring out ROI

[Account Closed]

Can anyone give me advice on how to figure out cashflow for rental properties.

A lot of detail but simplicity would be best, Im gearing up to purchase my first multi-family home.

I am already approved for the loan and have been house hunting for quiet some time now.

So I would really appreciate the help, thanks!

[Curt Davis]

You take either your gross cash flow or figure out your net cash flow, multiply that by 12 (12 months) and then divide that by your all in expense. 

Example:  Rent is $800 minus mortgage payment including taxes and insurance $400 then minus out monthly property management expenses of say $80 to have $320 in gross monthly cash flow left over. $320 x 12 = $3,840. 

If you purchased the home for $70,000 and put down 20% $14,000 but you also had a total of $4,000 in all in closing cost including tax and insurance escrow your total investment was $18,000. 

$3,840 / $18,000 = 21% gross ROI

Now to get your NET cash flow you would also subtract additional factors out like say $50 repair allowance and $50 vacancy allowance per month. Maybe even $50 for CAPEX. So you take the $320 gross minus $150 to get $170 per month in NET cash flow.

$170 x 12 months = $2,040 / $18,000 = 11% NET ROI

If I botched all this math forgive me. 

Hopefully this gives you an idea of how investors figure if its a deal or not. Some might think this example is a good deal and some might not. 

Good luck