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Updated over 5 years ago on . Most recent reply

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David S.
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Do I have a good or bad rental?

David S.
Posted

Having trouble determining how to assess my investment returns. My rental property is in Boston where 1% rule is hard to achieve (live-in converted to rental after moving out). Rent is 3300/mo. but after all expenses and mortgage net cash flow is about $80/mo. Property was purchased for $500,000 with 10% down in 2009 ($50k initial investment). It is now valued at about $800,000 10 years later. Mortg. bal is now $355,000 so equity is $445,000. 

Appreciation has been the reason for holding on to it, but the ROI appears to be dismal if I calculate it based on current equity. ($960/445,000=0.2% per yr). This does not factor in the appreciation CAGR of about 4.7%. But still makes me think maybe I should liquidate and reinvest into the stock market for 8% returns. Rents in the area do not go much higher than 3300 to 3500.

Am I looking at this right? Can anyone give any thoughts on this? 
 

Most Popular Reply

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Patricia Steiner
  • Real Estate Broker
  • Hyde Park Tampa, FL
3,857
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Patricia Steiner
  • Real Estate Broker
  • Hyde Park Tampa, FL
Replied

A 60% return on investment...that's the math on an investment of $500,000 and a Returned Amount of $800,000.  60%.  This is the stuff of financial genius.

Yes, you could sell and buy a lot of "doors" - as investors like to say - but a whole lot of something doesn't guarantee a ROI that is a whole lot more. It could actually be a whole lot less. The math matters - not the quantity.

When looking at an investment, we consider the potential for substantial cash flow and property appreciation or either/or.  We prefer appreciating properties that can cover their own carrying costs because the overall gain is greater.

Appreciation and rents are only going one way in your city - just like mine.  I think you've got something well worth hanging onto.

Here's a pat on the back for an investment well-made.

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