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Updated almost 5 years ago on . Most recent reply
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Hypothetical of a rental situation for clarity
The following is a hypothetical situation about investing in rental properties that I came up with in my head from what I already know. I don't know if its correct or incorrect, but here goes:
Let's just say I bought a single family home for $30,000 and the repair amount is $10,000, then that means the total amount I invested so far is $40,000. Also, let's assume that the property has an FMV of $90,000. If I divide the amount I invested, which is the $40,000, by how much I expect to make per month in cash flow, let's just say, $500 per month, that will give me the number of months that it would've taken me to get my money back through the cash flow. So, $40,000/$500 = 80 months = 80/12, which is approximately equivalent to 6 years and 6 months (I got 6.66666…… on my calculator)? So, it would take somewhere around 6 years and 6 months to get a return on my investment.
Is this how this works?
Also, if I make my money back after those 6 ½ years, and then turn around and sell the property at $90,000 (Hopefully it would have appreciated over those 6 years) then isn’t that another $50,000 that I have made on my investment of $40,000.
Is this how that works or am I missing something?