All Forum Posts by: David S.

Thank you all for the replies and thoughts on this! To answer a couple of questions, we bought in 2009 and moved in 2012 when we began renting it. The value at that time was about $540k. We have bypassed the Sec 121 option based on the view that long term appreciation would outpace the tax benefit of Sec 121. Its in the South End. Time will tell if that was a mistake or not, but down the road we could theoretically move back in there for a couple of years. 

I’ve been reading further about how to analyze returns on BP and other websites and it seems I may have missed an important return factor. It seems the repayment of principal should be added to the annual returns as well as appreciation. This makes sense to me because the interest is the cost of the loan, not the repayment of principal. So the components that I should be including in return are:

Cash Flow: $80/mo or $960/yr (this includes P&I and all expenses since they all do impact cash flow). 

Principal Pay down: $9,700/yr

Appreciation: $32,000/yr (expected 4% appreciation on $800,000 current value). 

So if I use the sum of those figures as my "return" $42,660 divided by equity of $445,000 then the return is 9.6%. If I only compare the annual return to my investment in the property $100k ($50k initial down payment and $95k so far of mortgage reduction) then annual return would be 42.7%. ??

Any thoughts on this new view of returns is welcome as i'm still not sure the best way to analyze things. I'm not certain how to run IRR, but will look into that as well.

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?