With time, you will be able to look at pictures of a listing online and analyze the condition of a property, along with what repairs it will likely need in the future - and add that into the model. When I was a new investor, this was one of the hardest things for me to learn. With this in mind, one of the most important things you need to learn to use this model successfully is how to accurately predict expenses. In fact, you should ignore it completely for anything that rents for less than $700, as you would want closer to a 1.5% or 2% number for a deal with lower rents to pencil out. It’s worth noting that the 1% rule is just a guide and doesn’t apply to all markets. However, when hunting for deals in nicer areas, I generally look for properties that meet the 1% rule, where monthly rents are 1% or greater than the purchase price of the property, and cash-on-cash returns are above 8.5%. With a lot of potential for appreciation in the next five or so years.įor these properties we’re aiming for above a 15% cash-on-cash return, and we’re looking for deals that we can refinance and pull out all of our capital once we finish renovations and leasing (the BRRRR Strategy). Louis market and our strategy is to mostly buy properties on “ the fringe” - areas that have good cash flow Some investors are looking for cash flow, while others are simply looking to break even on cash flow and make their money through appreciation in value and tax write-offs. When it comes to investing in real estate, a “good” return can be very different based on each individual investor and their goals. What Is a Good Return for a Rental Property? In this video I use the advanced calculator to model a real deal I found on Zillow, and talk through how I estimate expenses using just listing photos, and decide whether a deal is worth further diligence. Here is what the output of this tool looks like.
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