Vacation Rental Property Return on Investment Calculator
Once you have determined the perfect city and community for your income producing property, you may need to determine the return on your investment (ROI). Investors typically use a ‘Cash-on-Cash’ return calculation to determine the feasibility of a particular real estate investment. This calculation takes into consideration all the costs and income of a property to measure the annual return in relation to the mortgage payments. Cash-on-Cash return is considered one of the most important ways to understand ROI of a real estate investment.
Rental Property Cash Flow Analysis
Table 1.2 Rental Property Cash Flow Analysis*
Investors need to determine what a good Cash-on-Cash return would be. Some consider a 4-8% ROI a great investment while others will not even consider a property with less than a 15% Cash-on-Cash return. Each investor has individual need for an income property and therefore should choose a property based on the return that suits their needs. Determining the risk you are willing to take on market fluctuations, vacancies and the amount of money invested is of paramount concern to investors. Sage advice from seasoned investors is to never invest more than you can afford to loose and always talk to a CPA before investing in real estate.
* All information in this guide and Table 1.2, while believed to a moderately fair depiction of rental rates at the time of publication the numbers in this table are for example/educational purposes only and only serve to show how to fill out a cash flow analysis. The rental market fluctuates daily, seasonally, and therefore the information is not guaranteed to be accurate by the Jelmberg Team, Inc, Keller Williams Realty or any agent, employee or contractor thereof. Real estate investment carries significant risk and all information and advice from any source should be independently verified by multiple professional sources beyond a real estate agent. Please verify calculations and seek professional assistance by a registered CPA before making any financial decisions.