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?
  • November 16 2010 - Indianapolis
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    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.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (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.
  • November 16 2010
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    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.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

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!
  • November 17 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    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.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.