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Message
What is my current ROI? Am I making money on these rentals?
Posted on 8/6/14 at 9:44 am
Posted on 8/6/14 at 9:44 am
Property #1
Rent-$1879
Mortgage Payment-$978
HOA-$177
Property Tax-$4179 per year
Insurance-$875
I owe about $104k on this unit. Value 189k. 12 years left on a 15 year 4.75% note
Property #2
Rent-$1389
Mortgage-none
HOA-$475 a month,$100 of which will drop off at end of year.
Property Tax-$2100 per year
Insurance-$220 per year as it is just a rider on my homeowners and the HOA has the major policy.
I can do the cash flow but what are the other factors when it comes to ROI.
The reason for my question is I am at a cross roads as I do not feel like I am making money and am considering selling.
Thanks
Eta the insurance on the first unit is $875, not $4875 as originally listed.
Rent-$1879
Mortgage Payment-$978
HOA-$177
Property Tax-$4179 per year
Insurance-$875
I owe about $104k on this unit. Value 189k. 12 years left on a 15 year 4.75% note
Property #2
Rent-$1389
Mortgage-none
HOA-$475 a month,$100 of which will drop off at end of year.
Property Tax-$2100 per year
Insurance-$220 per year as it is just a rider on my homeowners and the HOA has the major policy.
I can do the cash flow but what are the other factors when it comes to ROI.
The reason for my question is I am at a cross roads as I do not feel like I am making money and am considering selling.
Thanks
Eta the insurance on the first unit is $875, not $4875 as originally listed.
This post was edited on 8/6/14 at 10:03 am
6
Posted on 8/6/14 at 9:57 am to StrangeBrew
how much is the 2nd unit worth? if its worth more than $150k I'd probably consider selling.
The first one your ROI sucks. Can't be more than 3-4%.
ETA: sorry actually the first one isn't that bad as your equity is only 80k.
The first one your ROI sucks. Can't be more than 3-4%.
ETA: sorry actually the first one isn't that bad as your equity is only 80k.
This post was edited on 8/6/14 at 10:02 am
Posted on 8/6/14 at 10:00 am to StrangeBrew
Depends on what you want these rentals for, imo. If it's for long term wealth and using this rental business as write offs for taxes, I think rentals are great investments. You can depreciate these down and leave it to your children when you die and they not be hit with a big tax burden.
Posted on 8/6/14 at 10:05 am to C
Second unit is worth $100k and I changed the insurance on unit one to $875, not 4875 as originally listed
This post was edited on 8/6/14 at 10:45 am
Posted on 8/6/14 at 10:31 am to StrangeBrew
LINK
Calculator link. The 15-yr note is going to skew your numbers a bit as you are more or less choosing to pre-pay the loan quicker than a traditional 30-yr term, reducing current year cash flow. Money is fungible, you could be spending or investing that differential in something else so might want to tweak it in your analysis. Is this a condo or townhouse with some land and do you have significant depreciation expense? I am not a fan of property with HOA fees.
Calculator link. The 15-yr note is going to skew your numbers a bit as you are more or less choosing to pre-pay the loan quicker than a traditional 30-yr term, reducing current year cash flow. Money is fungible, you could be spending or investing that differential in something else so might want to tweak it in your analysis. Is this a condo or townhouse with some land and do you have significant depreciation expense? I am not a fan of property with HOA fees.
Posted on 8/6/14 at 10:45 am to C
quote:
The first one your ROI sucks. Can't be more than 3-4%.
How can you possibly know this without knowing how much money he has invested?
Posted on 8/6/14 at 10:50 am to I Love Bama
quote:
How can you possibly know this without knowing how much money he has invested?
he states how much he as invested... Even though I ignored it
Posted on 8/6/14 at 11:02 am to StrangeBrew
quote:
Property #1
Rent-$1879
Mortgage Payment-$978
HOA-$177
Property Tax-$4179 per year
Insurance-$875
I owe about $104k on this unit. Value 189k. 12 years left on a 15 year 4.75% note
How much did you buy it for? How much did you use as a down payment?
Let's assume you paid $189,000 for it and put 20% down. I don't know what HOA is responsible for so I'll leave out replacement reserves although those should be accounted for( along with vacancy expenses and your time for managing the property).
Amount invested - $37,800
Revenue per year - $22,548
Expenses per year
Mortgage - $11,736
HOA - $2,124
Taxes -$4,179
Insurance - $875
NOI - $3,635
These numbers are awful. Without even taking other expenses into consideration, if your property is vacant 2 months you are in the negative.
I would sell.
ETA : Bottom line, we need WAY more details to really give you an accurate representation of your investment.
This post was edited on 8/6/14 at 11:08 am
Posted on 8/6/14 at 1:08 pm to I Love Bama
disclaimer:I had to google what NOI was.
what about the money paid to principal?
on a 15 year loan he has to be paying close to 50% principal, thats an additional 6k to equity, right?
what about the money paid to principal?
on a 15 year loan he has to be paying close to 50% principal, thats an additional 6k to equity, right?
This post was edited on 8/6/14 at 1:09 pm
Posted on 8/6/14 at 1:44 pm to I Love Bama
Technically shouldn't he only use the interest part of the mortgage in the NOI calculation, with the amortization increasing his net investment? Not that it will really help his ROI.
OP needs to provide purchase price and current fmv/appraised values for reach of the properties too.
OP needs to provide purchase price and current fmv/appraised values for reach of the properties too.
This post was edited on 8/6/14 at 1:47 pm
Posted on 8/6/14 at 2:16 pm to sneakytiger
quote:
OP needs to provide purchase price and current fmv/appraised values for reach of the properties too
Property #1 was bought by me 11 years ago. I lived there for a year then got married and turned it into a rental. I paid $160k. I have had three tennants with it never going more than 2 months vacant. One tennant lived there for 7 years and did a bunch of upgrades without any money from me. On mint.com, zillow has it estimated at 190k. I think I could get over 200k since it is a rare two bedroom single story in this town house complex. They go for way more per square foot than the two story units.
Mortgage Payment breaks down 545 to Principal and 400 to Int.
ETA: Originally had a 30 year but refinanced down to a 15 year. original interest rate was 7.5
This post was edited on 8/6/14 at 2:20 pm
Posted on 8/6/14 at 3:12 pm to C
quote:
he states how much he as invested... Even though I ignored it
Where did he list how much he invested?
Posted on 8/6/14 at 4:09 pm to MikeBRLA
quote:
Where did he list how much he invested?
doesn't matter. He's looking for whats the better investment going forward. I know he asks "current ROI" but that's not what he's looking for.
Posted on 8/6/14 at 5:43 pm to C
ok, I will do my best from the investment angle.
Property 1 I only put down 10% so 16k.
Property 2 gets complicated as I bought it with a partner through an LLC we established. He had financial problems so I bought his interest out for like 2k. We both invested 10k and bought the unit for 90k. The note was a 7 year ARM that no one would touch with a 10 foot pole since it was in the LLC's name and when it was time to refinance they did not do those types of loans anymore, so I paid off the loan about 4 years ago. I paid 55k. This property also has only had three tennants in the 12 years I have owned and has been vacant for about 6 months in that time.
Property 1 I only put down 10% so 16k.
Property 2 gets complicated as I bought it with a partner through an LLC we established. He had financial problems so I bought his interest out for like 2k. We both invested 10k and bought the unit for 90k. The note was a 7 year ARM that no one would touch with a 10 foot pole since it was in the LLC's name and when it was time to refinance they did not do those types of loans anymore, so I paid off the loan about 4 years ago. I paid 55k. This property also has only had three tennants in the 12 years I have owned and has been vacant for about 6 months in that time.
Posted on 8/6/14 at 5:59 pm to sneakytiger
You and Rust are both correct. My calculation was very simplistic due to the lack of data provided.
Posted on 8/6/14 at 8:46 pm to StrangeBrew
Was your credit bad when buying the first one? I have a $225k home on 30 yr fixed at 4.50% and the note is $1464 and taxes, insurance, etc are all included in that figure!
I lease it for $1800 (remarried and moved into her bigger home). PERFECT tenant wanted it for 3 yrs to not have to pay out of state on 2 daughters college and she works in pipeline consulting. Basically there half the month at best.
Mortgage balance is $185k home is appraised at $255 after 9 years.
So I pay 12 x 1464 = $17568/yr in all inclusive mortgage. She pays me $21600/yr. The extra goes to principle.
Point being 1) how is your mortgage and all so high on a much cheaper home? and 2) plenty of people will tell me I should sell because I could put the money somewhere and do better..
As of now, I say bullshite, my house will be paid for in 10 yrs and I'll have a non-taxed $300k+ retirement helper when I sell it.
WTF? My HOA now in a $550k+ hm is $40. Is your's in Destin or something? lol
I lease it for $1800 (remarried and moved into her bigger home). PERFECT tenant wanted it for 3 yrs to not have to pay out of state on 2 daughters college and she works in pipeline consulting. Basically there half the month at best.
Mortgage balance is $185k home is appraised at $255 after 9 years.
So I pay 12 x 1464 = $17568/yr in all inclusive mortgage. She pays me $21600/yr. The extra goes to principle.
Point being 1) how is your mortgage and all so high on a much cheaper home? and 2) plenty of people will tell me I should sell because I could put the money somewhere and do better..
As of now, I say bullshite, my house will be paid for in 10 yrs and I'll have a non-taxed $300k+ retirement helper when I sell it.
quote:
HOA-$177
WTF? My HOA now in a $550k+ hm is $40. Is your's in Destin or something? lol
Posted on 8/7/14 at 7:21 am to GeeOH
quote:
WTF? My HOA now in a $550k+ hm is $40. Is your's in Destin or something? lol
Come up to DC and live in a highrise so you can enjoy the pleasures of a $500/month HOA on a $400K property.
Posted on 8/7/14 at 12:33 pm to foshizzle
The HOA on that property includes water, light and gas. Some solice.
Posted on 8/7/14 at 2:57 pm to foshizzle
quote:
$500/month HOA
Those are getting to be the standard here in Houston as well. 400-500/month.
Posted on 8/7/14 at 7:29 pm to GeeOH
quote:
Was your credit bad when buying the first one? I have a $225k home on 30 yr fixed at 4.50% and the note is $1464 and taxes, insurance, etc are all included in that figure!
No my credit was not bad, but this was common practice back then. The days of the liar loans.
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