Return on Investment for a Rental Property

Here is an email I sent to an owner regarding a property he purchased back in the fall of 2012.  He was trying to get an idea of how he had done on his property.  What do you think?

Hello Bill,

Please find attached a report from 10/1/2012 – 7/1/2013.  The tenant moved in on July 1, 2013, so that income shows.

It shows your total expenses to that point of $60,517.73.  Your purchase price was $81,000 on 10/12/2012.

You paid some closing costs but I don’t have the Settlement Statement with that amount readily available.  I can dig that up if you like but it wouldn’t have been too awful since you paid cash.  Probably around the $900 range.

That means your “all in” expenses on the house before it was set in to service are $142,400, more or less.

Hope that helps.

Now, let us have some fun.

From Day 1 through Today you have spent $66,541 on expenses plus your purchase with closings costs of $81,900 totaling $148,441.  You do not have the property leveraged so that is all your money in.

From Day 1 through Today you have earned income of $50,100.

Today’s estimated value is between $175.000 to $188,000 depending on a few things.  Let’s say $175,000 to be conservative.

I’m going to go ahead and subtract sales costs of 7.5% (for commissions, closings costs, etc) to figure our real return…which would add up to $13,125.  Plus you’ve paid your own home owner’s insurance and property taxes. I don’t have those exact numbers.  But let’s say since October of 2012 those have added up to $12,500 ( a rough guess).

Therefore, your true value is $161,875.

Your “all in” minus the income you’ve earned is $110,841.

You have invested $110,841.
Your current market value is $161,875.

That is a 46.0% increase in your monies.

Kinda fund to figure all that, right?

2 Comments

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2 responses to “Return on Investment for a Rental Property

  1. jkane74606@aol.com

    Thanks so much. I love your letters and fun input. God bless you. Sincerely-Jay Kane/Owner of J K Properties

  2. Thanks for sharing your letter. It helps in many ways.

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