Quote:
Originally posted by turbo6bar
$833 per month is not 8% CAP rate. 8% cap rate is the $20k/yr or $1650/mth before expenses, but not including mortgage. I generally take 75% of rent in my return calculations, so 8 cap rate = $2250 monthly rent.
Rent you get is equal to what the market will pay. I doubt you will find a deal that pencils out well.
I hate to be such a pessimist. The only profit in RE right now is appreciation, and there are signs it may be coming to an end. HardDrive, I can send you a few Excel spreadsheets that can help you run numbers for RE investments. Send me a PM.
In general, I like to see cash-on-cash return of 20-30% per year, and CAP rates of 10. However, on some properties, the appreciation is dragging the CAP rate down to 8, making selling and taking profits very enticing. CAP rate = value of property / income - expenses. Ignore the mortgage payment in this calculation.
Feel free to ask if this is confusing.
good luck,
jurgen
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I meant per unit. Thanks for clearing up the confusion.
I agree with everything Jurgen is saying. The only opportunities are inland. I'm hitting just above Jurgen's targets in Bossier City, LA, but I don't know for how long I can do that.