You need to charge high enough rent to cover your expenses and take home a profit.
With mortgage payments to contend with and a tough competition, you may only be able to profit $200 to $400 per month on a property.
That’s $4,800 a year, a far cry from the $50,000 we’re talking about for earning a living.
What is a good rate of return on rental property?
Generally, the average rate of return on investment is anything above 15%. When calculating the rate of return on a rental property using the cap rate calculation, many real estate experts agree that a good ROI is usually around 10%, and a great one is 12% or more.
What is the 2% rule in real estate?
The 2% rule in real estate is a rule of thumb which suggests that a rental property is a good investment if the monthly rental income is equal to or higher than 2% of the investment property price. For example, for a $200,000 rental property, the rental income has to be at least $4,000 to meet the 2% rule.
Is a rental property a good investment?
Investing in rental properties is a great starting point for real estate investors. Rental properties can provide cash flow and generate value from appreciation. Investors also get tax incentives and deductions from owning real estate.
How do you profit from rental property?
Run the numbers. When you invest in a rental property, the goal is to make a profit using other people’s money. That means you put down as little of your own money as you can, borrow the rest and let the tenants pay the mortgage, says Voreis.