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Should I purchase a rental property?

4/25/2016

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The answer should be based on the cash flow analysis. Is the analysis result positive or negative?

Let's look at one example.
  • The property is a $240,000 single family home
    With 48,000 down payment (20%) , mortgage is $192,000 with 3.92% 30yr rate. The monthly payment is $908/month with $10896/year
  • The closing cost is $5000. 
  • The rent is $1800/month (0.75%) with annual rent $21,600/year
    Austin generally lease for somewhere between 0.5% to 0.8% of the market sales price per month. 
  • HOA: $128/year
  • Property tax $4,616/year (1.9%) 
    Property taxes average 2.4% to almost 3% of assessed market value.
  • The property insurance takes $500/year ($42/month)
  • Annual repairs: $1512/year
    Assume 7% of gross annual rent toward repairs and maintenance 
  • Annual rent for vacancy and leasing cost: $2160/year (1.2 month/year)
    Assume 10% of gross annual rent toward vacancy/leasing
  • ​Annual rent for property management: $1512/year (
    Assume 7% of gross annual rent toward management fees if you will be using a property manager.
    ​
With these estimations, the cash flow is calculated as:
  • (21600-10896-128-4616-500-1512-2160-1512) = $276/year
It's positive! If you consider the average 4.5% per year appreciation, you will also get $10,800 value increase in the house value.  Evaluate the purchase and make a plan. Then, you have a good basis to make your decision. 

Contact us or your agent to provide the detailed analysis. ​​
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