I have come to a figurative Y in the real estate investment road. Let me explain using a rent house I own outright here in Lake Dallas.
$1750/month rent = $21,000 per year coming in at FULL OCCUPANCY (so with no empty months) any vacancy or cost to re-rent puts a dent in this.
Insurance just renewed at $2020 for the next year
After challenging the assessment I got it taxed at $255,000 for a total of $5681/yr
I own this home outright so no mortgage expenses.
You will note that I am not including any maintenance costs (to keep this simple)
This home will sell in a day or two and I would walk with $300-310k after closing. Let's use $300k for round numbers
Simple math on this: 21,000 - (taxes) 5681 - (insurance) 2020 gets me to $13,299 in a world with no hail storms or broken ac units. $13299/300,000 (cash out if home sells) = 4.4% return
If I have $300k sitting in a bank CD I can expect to earn 5% which translates to $15,000 per year. I do get to write off some depreciation on this home and I have not calculated that in here.
Capital gains tax!!! no. I would do a 1031 Tax free exchange into a Delaware Trust offered by the 1031 facilitator. I have a client that did this and she tells me her return is around 8% per year.
With no mortgage on that house I need over three months of rent to cover cost of taxes and over a month of rent to cover insurance. Hail storm with my 2% deductible or any sizable repair sure kills the charm.
Why should I keep this house? There is some appreciation potential here but it sure seems to come at a high cost (due to low returns annually) for me. Are you all seeing these same sorts of numbers? If you have a mortgage to pay things get really tight.
$1750/month rent = $21,000 per year coming in at FULL OCCUPANCY (so with no empty months) any vacancy or cost to re-rent puts a dent in this.
Insurance just renewed at $2020 for the next year
After challenging the assessment I got it taxed at $255,000 for a total of $5681/yr
I own this home outright so no mortgage expenses.
You will note that I am not including any maintenance costs (to keep this simple)
This home will sell in a day or two and I would walk with $300-310k after closing. Let's use $300k for round numbers
Simple math on this: 21,000 - (taxes) 5681 - (insurance) 2020 gets me to $13,299 in a world with no hail storms or broken ac units. $13299/300,000 (cash out if home sells) = 4.4% return
If I have $300k sitting in a bank CD I can expect to earn 5% which translates to $15,000 per year. I do get to write off some depreciation on this home and I have not calculated that in here.
Capital gains tax!!! no. I would do a 1031 Tax free exchange into a Delaware Trust offered by the 1031 facilitator. I have a client that did this and she tells me her return is around 8% per year.
With no mortgage on that house I need over three months of rent to cover cost of taxes and over a month of rent to cover insurance. Hail storm with my 2% deductible or any sizable repair sure kills the charm.
Why should I keep this house? There is some appreciation potential here but it sure seems to come at a high cost (due to low returns annually) for me. Are you all seeing these same sorts of numbers? If you have a mortgage to pay things get really tight.
