Many people over the years have said they would never rent their home. This is because they’re afraid of a tenant destroying their home. Unfortunately, we have all heard of horror stories of tenants destroying a home. This is because the stories are sensational to talk about. What about all the success stories? Our company has never had a home that was destroyed. We’ve had some that needed major repairs; however, this is very rare. Many homeowners have no major issues and huge equity gains. For example:
This is a “rough estimate” of how you can build wealth renting your home:
Home Purchase Price $450,000
Down payment -$90,000.
Loan Balance $360,000.
Mortgage 5%- 30-years, payment $1,932. per month x 12 = $23,184.
Taxes per year $1,800.
Homeowners Insurance per year $750.
Maintenance per year $1,000.
Total yearly expense $26,734.
Rent $2,000. per month x 12 $24,000.
Property management fee $2,400.
Net rent income per year $21,600.
Loss is per year is $5,134.
Let’s say you rent the home for 5 years.
1) Tenant has paid your mortgage.
2) You gained equity at 5% per year “compounded.”
Paid $450,000 – Current value $573,348- you gained $123,348.
3) You lost $5,134 per year = $61,606 (Expenses) -you gained $61,742
4) Less paint and carpet - $10,000.
5) In total you gained $51,742 in equity after expenses in 5 years.
*No vacancy factor.
Your down payment in “cash” was $90,000, so on $90,000 you made $51,742 or 11.4% return per year on your money plus the tax benefits. In addition, you own a tangible asset, something of useable value that is a stable investment over time.
If you would have rented your home you bought 5 years ago, your return on cash would have gone to the moon!
This is a basic example of how you can build wealth through investing in real estate and rental properties. Before you buy or rent your home, seek the advice of your accountant and attorney as we are not investment consultants.Be the first to know about new homes on the market. Sign up for our email alerts and never miss a listing.
We will help you find a Rental Property, call today (928) 486-3368.