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You calculated gross. You should calculate net. It's a non-zero cost to have a tenant. For demonstration purposes, if it costs $2700/month then the difference i
by eesmith 3y ago
You calculated gross. You should calculate net. It's a non-zero cost to have a tenant. For demonstration purposes, if it costs $2700/month then the difference is $1,070 in profit vs. $3,153 over 5 years, corresponding to about 2.5 years.
If the market rate increases by 10%/year than if you wait a year you can charge an additional 8% over having a tenant.
- deanCommie 3y agoThe vast majority of the cost of having a tenant is the MORTGAGE you're paying. Which you have to pay regardless of whether the unit is occupied or not. So the actual situation is FAR worse than what I estimated.
- eesmith 3y agoMortgage payments give you equity. Once you pay it off, you get title to building, and its full worth. If your tenants are paying enough to cover your mortgage plus maintenance then after the mortgage is paid off (in 20-30 years), you can sell the building and not split the sale price with anyone. Now, you do lose out on the interest payments. On the other hand, access to more capital via a loan gives you access to a better ways of generating money, so you need to calculate the full expected future value. Just like if you buy the building with cash - no mortgage! - you have to factor in the effects of your lower liquidity. In any case, my point is that your earlier "basic scrutiny" omits some very important "super fundamental" details so cannot be used to reach the conclusion you think it did.