Question in financing and calculating profitability - property with a 70% mortgage for 30 years. After all…
Question in financing and calculating viability - property with a 70% mortgage for 30 years. After all expenses including the monthly repayment, what return on cash do you think is minimal to get into the deal?
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In my opinion in such a deal the question is not the profit percentage: the rental will bring a minimal percentage that they will also be on the cusp with every little glitch..but it will be worth it if there is a significant increase in value within two years and it is possible to redeem and leave at another time. At least I wasn't.
The price of the property with the renovation 155,000 $ and for it to take 70% mortgage (108,500 $) means that your invested capital is 46,500 $.
Your monthly payment of $ 685 on the mortgage. That leaves you $ 765.
I assume that the current expenses of the property (property tax, insurance, accounts, HOA, renewal fund) amount to about 40% of the income of the property - about $ 580.
This leaves you $ 185 a month, which is $ 2,200 per year, which is 4.7% return per year on equity.
All the more so if equity is also leveraged, then the returns erode the profit. On the other hand, your investment is small, so you are left with very little profit, but for free…
There are better deals…
Sounds like a low yield deal. But still profitable
The price of the property - 135,000
Renovation - 20,000
Rent - 1450
Mortgage - 70% for 30 years
Interest - 6.5%
It can be added that equity is also leveraged (simply in the country) so that actual equity is negligible (only interest rates).
It is a matter of "goal and purpose."
If it is a holding property, the answer will probably be “as much as possible”, meaning that the rent will repay the monthly mortgage payment, and the principal (equity) you have invested in as little time as possible. It is not known what the value of the property is, your investment in equity and rent, so there is no answer - assume that your high leverage "eats" quite a bit of the return (but spread over 30 years), and it is not known what interest you pay on the leverage.
I guess 8% net after refunds and payments should make sense.
If it's an asset to Flip, there is almost no significance to the monthly return. I don't think that's the case.
10%