Why Real Estate Investments Offer the Best ROI

How to calculate the return on investment for any rental property.

Are you considering investing in real estate? If so, know that it’s a fantastic way to build long-term wealth while maintaining a high cash flow through rental income. To help you find out if buying a rental property makes sense for you, today we’re going to show you how to calculate the potential rental income for any property.

Let’s say you buy a rental property for $350,000 with 5% down. You’d need $17,500 upfront for the down payment, and your mortgage would be $2,327.50 with our current interest rates. Based on the location of a property like this in our area, we could probably rent it out for about $2,500 each month. With these numbers, you’ll receive around $172.50 each month in cash flow.

“As your property appreciates, your long-term investment will only get better and better.” 

At first, that may not seem like a lot of cash flow. However, your return on investment will increase with your property’s value. With the numbers we just shared, the ROI is about 7.4% (which we got by dividing the cash flow by your monthly mortgage payment). That isn’t bad already, but it will only increase as property values and rents increase. As you charge more rent, your cash flow will increase, and as your property appreciates, your long-term investment will only get better and better.

If you need some advice on what types of properties are worth looking into, what makes sense for your budget, or anything else, please call or email us. We are always willing to help!