How to Calculate Return on Investment (Roi) for Property Rental Yields

Only available on StudyMode
  • Download(s) : 197
  • Published : August 2, 2010
Open Document
Text Preview
Case Study: How to Calculate Return Profits on Rental Property Investment

make more money through rental income property investment
Property Profile

Property Type : Serviced Apartment
Size : 821 square feet
Purchase Price : $ 235,900.00
Down Payment : $ 23,590.00
Home Loan Amount : $ 212,310.00
Home Loan Installment : $ 1,173.00 per month
Gross Rental : $ 2,200.00 per month
Expenses : $ 832.37 per month

* Service Charges = $ 164.05
* Sinking Fund = $ 16.79
* Quit Rent = $ 2.85
* Assessments = $ 23.51
* Fire Insurance = $ 16.00
* Property Agent Fees = $ 183.33
* Government Tax for Property Agent Fees = $ 9.17
* Tenant move in/out where 1 or 2 months rental income maybe lost = $ 366.67 (Assumed lost 2 months = $ 4,400. Therefore, Extra Cost per month = $ 4,400 / 12 months = $ 366.67) * Repairs = $ 50

* Total Expenses per month = $ 832.37 per month

Nett Rental = Gross Rental – Expenses
= $ 2,200.00 – $ 832.37
= $ 1,367.63

Monthly Cash Flow = Nett Rental – Home Loan Installment
= $ 1,367.63 – $ 1,173.00
= $ 194.63

Other Assumptions:
a) No Tax Implications on the Rental Income or on Disposal of the Property b) No change in the rental rates, service charges or interest rates How to Calculate Rental Yields

roi property rental investment calculation formula rental yields return Analysis: Let’s compare to a Fixed Deposit (FD) at 3% per annum, this property’s rental yields at 6.96% is a good investment. As a guideline, the rental yields in property must be more than double the existing Fixed Deposit rates. Properties take longer time than FD to cash out because properties are not liquid assets. Besides, properties involved with numerous property and management issues. Therefore, double the returns of FD rates in rental property investment are a reasonable benchmark. How to Calculate Cash on Cash Return

This formula is mainly to calculate your yearly Nett Cash Inflow from the investment...
tracking img