What is the Price/Annual ratio are you looking for?

I am considering a duplex. The price is $85000 and the annual rent is about $14500.

What do you think about the ratio? What is the ratio are you looking for?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
November 16 2010 - Indianapolis
We think we've answered this question for you!
 
 

Replies (2)

I recommend you look at return on investment. You need to calculate what are you expenses per year and compare it to your income. If you are paying cash then consider the interest you would get if you invest your money in a different way for example put it in a savings account. Also consider property tax, insurance, losses in rent, property management cost, repairs, HOA fees etc. On the other hand tax benefits should also be considered. You don't need exact numbers. For example, if you add up all the related costs to 10000 per year and your rent is 14500, you have a $4500 return on a $85000 investment. That would be 5.3%. That's not bad when you consider what that you receive may be 2 percent in a savings account. In the current market purchases prices in many areas of the US are extremely low and a real estate investment will generate most of the profit in a few years when you sell at a much higher price.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
November 16 2010
Based solely on the ratio above you are looking at a cap rate of 17% which is fantastic.  That being said, you must be sure to have a grasp on all additional expenses and taxes that owning this home will have.  From first glance, this appears to be a solid investment.  If a home is giving you what amounts to $1200 per month as this does, and your mortgage, taxes and insurance would be much less as it appears would be the case with a purchase price of 85K, then you are looking at a positive cash flow monthly.  Most investors have different rates of return that they feel they need to justify any investment, but most investors tend to look favorably on investments that have a 10% cap rate or higher as this does.  Best of luck and happy investing!
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
November 17 2010
 
  • Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.
Related Discussions
What is the Price/Annual ratio are you looking for?
Profile picture for Ben Kastein & Bob Hudetz
Latest reply by Ben Kastein & Bob Hudetz
November 17 2010 | 2 answers
  • Posted by Brooklyn Guan
  • In Investing
  • November 16 2010
Mortgage Rates
 
Be A Good Neighbor

Zillow Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy.

Homes for Sale
  1. 5535 Winship Ct, Indianapolis, IN Home For Sale
    5535 Winship Ct, Indianapolis, IN 46221

     For Sale: $95,000

    • Beds: 4
    • Sqft: 1300
    • Baths: 2.0
    • Lot: 13503
  2. 7130 Caversham Pl, Indianapolis, IN Home For Sale
    7130 Caversham Pl, Indianapolis, IN 46278

     For Sale: $188,900

    • Beds: 3
    • Sqft: 2387
    • Baths: 2.5
    • Lot: 1131
  3. 5229 E Walnut St, Indianapolis, IN Home For Sale
    5229 E Walnut St, Indianapolis, IN 46219

     For Sale: $131,000

    • Beds: 3
    • Sqft: 3044
    • Baths: 2.0
    • Lot: 5619