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Updated 11 months ago,
Calculating ROI on a rental unit converted from primary residence
Hello, I'm very new to RE investing, although I've been a landlord for the past year...this is probably a very basic question, but nonetheless it puzzles me - what is the most correct way to calculate ROI for a rental unit that has been converted from a primary residence? I couldn't find a specific answer for my scenario anywhere. Here's the scenario:
A little over a year ago my wife and I converted our primary res. to a rental without too much financial analysis. I know that it would've been better to do it back then, but better late than never, right? Anyway, now we are trying to decide whether we should sell or continue renting it out. So how do we calculate current ROI ? Here are the numbers (rounded up):
- Original purchase price ~ $180K
- Current value ~$230K
- Remaining balance ~ $140K
- Mortgage payment + HOA ~ $1,300
- Current rent = $1,700
To calculate ROI at the current time should I base it on the initial investment amount (downpayment) or the current equity position? I've read somewhere online that you should do the latter, but at the same time if I were to calculate ROI as if it was a potential new purchase I would base the calculation on the downpayment, right? Or should I add up the original DP to all mortgage payments we made while it was a primary residence and use that number as the total investment? What is the correct way of doing this? Thank you.