In this episode I lay out the numbers that I will be using to evaluate rental properties this year. Whether you agree with the way I am going to evaluate properties or not, at least you can see my thought process and how I plan on knowing whether or not the property is going to make a sound investment for me in my business.
One of the biggest considerations when purchasing investment properties is to understand your numbers and make sure that the investment makes sense for you and is giving you the rate of return that you require. Today’s episode is all about the numbers. Not the location, not tenant screening, not the lease; just cold, hard numbers.
First, I will just list the variables that I will be using to calculate whether or not an investment property make sense for me:
- Purchase price
- Financing terms and rate (payment)
- Property management
- Maintenance (optional)
Net Monthly Cashflow
Here’s an example of a rental property that I would consider a solid deal in my market.
I’m not saying this is the best deal I am going to find, but it’s definitely one that I would put an offer in on and take very seriously. For a lot of markets this is unheard of. It’s also very important to note that these numbers do not represent buying a house in a bad area that is un-rentable. In Michigan, these numbers are very attainable in good, solid middle-income, blue-collar neighborhoods.