Looking into my first rental property. What kind of return could I expect from this property?

[John Richardson]

Hi, I'm looking into buying my first rental property in another 2-3 months.  I'm looking around in my market to see what is out there, even though the listings will likely look very different in a few months.  I'm getting more familiar with what to look for and how to run the numbers.  I was wondering if you guys could run the numbers and give me a realistic expectation for a return.

Here is an example property:

http://www.realtor.com/realestateandhomes-detail/2...

Buying price: $80,000 (20% down - $16,000)

Total monthly rent: $1,475

Taxes: $3,800

Insurance: $800

The rest of the numbers you guys can add in as you see fit.  The listing says the utilities are all separate.  Also this would be a hands off investment so I would be using a property manager.  I'm interested to hear all of your estimates for an expected return! Thanks everybody  

[Jean Bolger]

You'll find a lot of investors here on BP who swear by the "50% rule" which says that over time your expenses will equal about 50% of your gross. I think it's a good guestimation tool. You won't have that much expense every year but you will eventually need to replace major things and that will really hit your cash flow for that year, bringing down the average. For this, you don't include the cost of your financing as an expense, but you do include taxes and insurance (even if they are bundled with your mortgage payment).

So:

1.475 gross x 50% = 737.50 - 343.50(est debt service) = 394 monthly

annual = $4728

that's good! Of course, in this theoretical example we don't have any repairs that needed to be done to rent  the units or any vacancy while those repairs were underway...

You can use the calculators under the "analyze" tab at the top of the page when you have some real numbers.

My opinion on property  management differs from Arlan's. If you can find a highly recommended property manager that knows your area and your tenant base then they are well worth the money.