Adiel Gorel, owner of ICG, has helped thousands feel secure. Find out about rental properties, retirement planning, and the best places to invest at this free virtual event icgre.com/guide
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Millions have different ideas about how to calculate return on investment for rental property. And millions are miscalculating exactly what is a good return on investment for rental property. Many have misguided, even dangerous notions of what a good return on investment for rental property truly can be. Here’s the biggest misstep. Many don’t know that a good return on investment for rental property can be known before the investment is made and before any mistakes are made.
It’s common for first-time investors to focus so narrowly on “cash flow” as the measurement of the return on investment, but there is a better way to calculate your true return on investment. Adiel Gorel, owner of International Capital Group has invested in 100s of homes personally and helped 1000s of regular folk understand and prosper from what he calls in his book of the same title Remote Control Retirement Riches.
How to calculate return on investment for rental property is very simple if the focus remains on the correct numbers. Investors must focus on the Internal Rate of Return also known as the IRR.
So, here’s the simple truth on how to calculate return on investment for rental property. Start with what is known. It’s known how much the downpayment will be. It’s known how much the closing costs will be on this rental. Most, if not all, of the regular monthly and annual expenses are known before the investment is made. Then an investor can decide for how many years the rental will be held as the renters pay off the mortgage.
The amount of the mortgage payments paid during that time is known. The average repairs that will take place and all the expenses during that time are largely known. Then it sells. Now all the numbers to focus on are known. How much it sold for, the commission and the closing costs will be known. Plug those into an Excel spreadsheet that actually has a function called X IRR, where investors can get the Internal Rate of Return, exactly. That’s the true, comprehensive measure of how to calculate return on investment for rental property. Then, anyone, can see what is a good return on investment for rental property and make the decision to invest from a place of knowledge.
“Good single-family homes in good areas actually means no headaches for an investor. A single-family home is desired by so many, right now. It’s a great investment. And great retirements are built on great investments.” says Adiel Gorel, owner of International Capital Group.
That knowledge empowers investors with a solid way to determine, what is a good return on investment for rental property and therefore if it should be invested in or not. While a single-family home property seems lower on cash flow at the beginning, the overall internal rate of return is usually very good. Moreover, once the property is locked into a fixed 30-year mortgage, the known forces such as inflation are constantly eroding the loan and making it tiny. Meanwhile, the tenant is paying off the mortgage with the rent month after month making the mortgage smaller and smaller.
Consistency of good renters, such as a family with kids, gives an investor the peace of mind to make all of their other decisions. Families with kids are buying these single-family homes so fast right now, that’s a big opportunity.
At ICG, we have rarely seen the IRR lower than 15% on any single-family homes we have helped investors find. It’s vital to remember when determining how to calculate return on investment for rental property people have made the mistake of looking only at the initial cash flow which can lead to the impulse to buy in less desirable areas, to buy properties that need to be fixed up, properties that may or may not rise in value all in the name of getting cash flow at the moment.
Why would any investor seek to buy so-so properties in so-so areas? Well, that’s the trap that has million miscalculating what is a good return on investment for rental property on the wrong numbers. Because on paper, the cash flow can seem very tempting. Life doesn’t happen on paper. Life happens in real-time. And so what happens when an investor buys bad properties because they think cash flow is the only return? They buy worse properties in worse locations, in worse conditions. And they are left wondering what is a good return on investment for a rental property of that caliber.
The results are predictable: worse tenants, worse rents, more evictions, and very likely more repairs. And all of a sudden, the focus on the initial “cash flow” is so much worse than focusing on the consistent, reliable financials of the property that brings in lower “to begin with ” cash flow but brings in a constant cash flow, and more predictable cash flow.
When you buy newer, well-constructed properties, things go smoothly. That’s the whole principle behind Remote Control Retirement Riches. Focus on the internal rate of return, including absolutely everything—downpayment, selling price, and the cash flow in the middle. That is the true measure of what is a good return on investment for rental property.
Eventually, when the investor sells the single-family rental home it can be used to pay for college education, more properties, and retirement. Do not get sucked into the common mistake of buying a junky home, a fixer-upper because it yields a small cash flow right now. That can quickly turn into a paper dream that goes up in smoke with one big repair. Focus on newer properties, single-family homes in the sunbelt states, with a fixed 30-year mortgage and predictable rents.
Visit ICGRE.com/guide to find out the best places to invest in real estate in 2022. Get details about how to calculate return on investment for rental property, and the best places to invest in 2022, Many people are surprised by how clear their decision is made by the answer.
Contact Info:
Name: Adiel Gorel
Email: Send Email
Organization: ALLUSA INVESTMENTS, INC
Address: 165 North Redwood Drive, Suite #250, San Rafael, CA 94903, United States
Phone: +1-415-927-7504
Website: https://icgre.com
Release ID: 89073512
