Will your existing and prospective properties produce the income you’re looking for?
The primary tool you need to make your decision is a rental property calculator. As you calculate how much your rental property will produce, consider these expenses.
Monthly Rent Potential
How much can you charge based on the market? Remember, it’s the market (not your monthly expenses!) that drives your rental rate.
What’s it going to take to get your house rent-ready? For a house that’s less than 10 years old, it’ll cost an average of 1% of the property value. For older homes, add in the approximate cost of necessary repairs and updates as well.
Find out what interest rate you’ll get on a loan. Then determine the term of the loan (10, 15, 25, or 30 years). Once you secure these figures, you can better calculate your monthly mortgage.
Down Payment Amount
How much do you want to put down on the loan? If it’s less than 20% of the selling price, add on the PMI (Private Mortgage Insurance) fee your bank adds to your monthly mortgage.
After you figure out these basic monthly expenses, add the costs associated with:
- Insurance cost ratio
- Property tax rate
- Maintenance reserve rate
- Depreciable percentage of investment cost
- Incremental personal tax rate
- Year one cash and profit calculation
- Total operating expenses
- Vacancy cost
- Total management expenses
FREE Rental Property Calculator
If you don’t know all these numbers (or you just don’t want to deal with them), don’t worry! A good property manager takes you from the first stages of finding an investment property to navigating the figures that determine if that investment is worthwhile. At LEAP DFW, we’ll send you a rental property cash flow spreadsheet so you can see exactly how it totals up.
Plus, we’ve also provided an absolutely free calculator to help you run the numbers. This is the same calculator we use with every single property we manage. Other sites charge monthly fees for a tool like this, but just sign up here for access to the rental property calculator today.