Did you ever wonder about renting out a house that you own? What kind of expenses you might expect? How much money you might make?
If you have, the following tool is right up your alley. It was inspired by a post at Adventures in Money Making, which provided the math for determining how much cash can be generated from a rental property. The default numbers are those provided in the original post's example, so you should change them to better fit your rental investment:
The goal, of course, is to have a positive cash flow value, with a cash on cash return well ahead of what you could have earned through another investment. For reference, the owner of the property in the example, Empty Spaces, Inc., tries to generate at least a 16% cash on cash return in areas where property prices are rapidly appreciating, and a 30% cash on cash return in areas where the rate of property value appreciation is low.
You should also note that the mortgage amount in the example is obtained by adding the owner's two interest-only mortgages together. Your method of financing your rental property may be considerably different.
Labels: investing, real estate
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
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