With housing prices up since the pandemic, your investment might not be working quite nearly as hard as it should.
Did you purchase your first property and decide to keep it as a rental? You’re not alone. Many people choose to do this and it’s a great way to get started. You know a lot about the property. Oftentimes you have a friend who wants to move in making the search for a tenant easy. Almost by happy accident, you become a landlord.
Flash forward x number of years. Your property has gone up in value. You have a great tenant so you haven’t increased their rent in many years. However, it now means that your equity within the property is at the current market rate minus any mortgage, but you can also add whatever remodel you have done to the property. This gets you your grand total of equity within the property. And your property is generating B per year minus taxes and insurance.
Here is what the equation looks like:
Yearly Rental Income - Yearly Cost of Mortgage - Taxes and Insurance
Equity in the Property
I had a client who did just this. Their property looked like this:
45,600 - 0 - 7000 38,600 =5.3%
My client sold this property and purchased another that did require a bit of work and the math looked like this:
144,600 - 34,500 - 25,000 85,100 =9.15%
730,000 + 200,000 930,000
In this scenario, my client had a condo that he sold. He bought another property that was not generating very much income. He spent about $200,000 and was able to increase the rents by about 50% bringing us to the second equation. The bonus is that he will slowly increase rents over the years. Pending he increases rent year over year by 2% to keep up with his property taxes, he will increase his rate of return by over 10%! And he increased his yearly income from his property by almost $50,000!!!
Contact me today to see if you could double your rate of return or increase your income from your rental property!!!