All Forum Posts by: Nilay Shah

thanks so much for taking the time to explain!

thanks

thanks for the reply -

what I was getting at is, the mortgage payment includes principal and interest each month.

The principal portion of the mortgage is building equity in the property. So how does that factor into being an expense? In the end it is a gain to me when I sell the property as I will keep the equity

the first guy who responded seemed to differ from your explanation

yup - thanks so much for the quick response!

when calculating your ROI on a rental property - do you eliminate the principal portion of your mortgage payment since you are essentially paying yourself?

For example:

Purchase Price: $174,000
Mortgage: $120,000
Out of Pocket Costs: $76,000

Monthly Expense:
Mortgage Payments: $535 (year one average monthly interest = $341)
Taxes: $357
HOA: $210
Total Monthly Expense: $1102 a month

Yearly Income: ($1750rent x 12) = $21,000 - $13,224 = $7776 profit

7776/76,000 = 10% ROI

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OR would you calculate ROI with the $341 interest payment

Monthly Expense:
Mortgage Payments: year one average monthly interest = $341
Taxes: $357
HOA: $210
Total Monthly Expense: $908

Income: ($1750rentx12) = $21,000 - $10896 = $10,104 profit

10,104/76,000 = 13%

thanks

was an interfamily loan..

hey @Will Barnard

- thanks for taking the time to respond. good information. you mentioned previous "Your rent of $1750 vs. the acquisition of $189k is a ratio of less than 1% which will always equate to negative cash flow over a long period of time"

in your opinion, when evaluating, what should that % be to get it into a good deal area?

@Will Barnard

- thanks for the answer. the only thing to consider is, since this a condo - all exterior expenses are covered by the Association. I am responsible for only the interrior which has all new applicances and is fully repaired. So, down the line maybe ill have to change some of those things, but hopefully not any time soon

hey seth,

thanks so much for the response. 50% seems so high? While that is a fake number since you dont know till you get it - but are people using 50% when evaluating numbers? seems like you would never get a real good ROI with half being accounted for expenses? Also, if all appliances and everything is renovated in the place (as mine is) does that number differ?

Thanks again

hey daniel,

thanks for the reply - would you caluclate the vacany as one months rent?

As far as those other things, everything in the new unit is brand new so hopefully i dont run into those issues right away. how do you go about calculating that when getting your property?

thanks

Been reading this forum for a while and am excited to finally make my first post. I recentlty purchased my first investment property. I closed on 10/15. It is a 2bedroom, 2 bath condo in a nice community - Wanted your opinion on the deal. It was a short sale property.

Sale Price: 174,000
Repairs & New Appliances (renoved entire kitchen) - 12,500
Closing Costs: 1,492
HOA Payment for Previous owner: 1,175

Acquisition Cost: $189,167

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Mortgage: 120,000 - 30years. 3.45%
Down: 54,000 (i put more down because i had the money sitting in a low interest savings account)
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Income: Rent: $1750/month

Expenses:

Mortgage (Principal + Interest): 535.51
HOA: 210
Taxes: 357.25
Insurance: 19.17
NJR Furnace Service: $50 (purchased since i dont live near the area)
Total Expense: 1,173.93

Income - Expense = 578.07 x 12 = 6,936.88

ROI = 10.03%

Thoughts?