All Forum Posts by: John Dunn

Dollar amounts (annual) are:

Cash flow - $15k

appreciation - $25k

Including increases in equity (Appreciation and principal payments) ROI is 15% to start and increases to around 25% by year 5.

Thanks for the feedback.  Profits are essential (no way I would buy a money losing property for just appreciation) and margins on the rental income isn’t the sole financial driver of my analysis.  

Brandon - I am anticipating appreciation and plan to benefit from the appreciation by either doing a cash out refinance in a couple of years to help buy another property or a 1031 exchange.  My assumptions are also pretty conservative.  Rent increases are slightly above market but I’m also budgeting more for Maitenance to modernize the property.

Randy - I ran a scenario comparing investing the down payment and closing cost in an S&P index fund to selling the property after renting it for 6-7 years.  The rental scenario made money money.

I'm crunching numbers on my first investment purchase and suspect I'm focusing too much on the profit margin during the first two years (low single digits).   I think the margins will be between 10% (no refinance and lower interest rate) and 15% (refinance at a lower interest rate) in 5-6 years.   My gut instinct is the first year margin isn't the most important thing to focus on as long the property is profitable in the first two years.  Margins will improve over time since the largest expense (mortgage payments) is fixed.