How much ROI should you make on an investment property?
People want to know when purchasing an investment property, how much ROI they should get on a property. And if the property is priced higher, what type of return should you get.
Now, it’s a very vague question, and if you asked this question 100 times, you’d get 100 different answers. The reason this is not a straight forward answer is because there are so many factors to consider when investing in real estate, no matter the price. So, the first thoughts that came to mind when I get asked this question is:
How much risk do you want to take?
What area is this property in?
Do you want to be hands off or very hands on?
What is the condition of the property?
Will you have a property manager?
Does the property need work?
Is this 1 property with 1 door, 1 property with 2 doors, or 1 property with 20 doors?
Is it multi residential or commercial or mixed?
And many other questions that come flooding to my mind.
So there really is no straight answer, but if I had to give one, I would want at least a 10-20% return on any investment I made.
Now, if myself was going to buy a property that was priced at say half a million dollars lets say as an example, I would buy a property that is very hands off, because I’m a lazy investor.
This is because I don’t want the headaches of dealing with tenants, with dealing with property managers whom are constantly dealing with tenants and bringing the issues to me, dealing with maintenance and repairs. However, investing in low risk, low headache type properties usually means your return, specifically your cash on cash return that other properties might produce here in Windsor, will be much lower, if not nil. But this is fine with me because not having the stress is worth more then any extra cash in my pocket each month. As long as the mortgage is being paid down by the rent, and all my expenses are covered, I’m happy.
Throw in some appreciation in there on the value of the property and I’m really happy! And that is what return I would want on an 500k property. I’ve learned you just don’t get rich quick in real estate. Investing in real estate is long term, but it is very lucrative.
So, as I said, so many different ways to analyze real estate investment properties. It will come down to you personally and what your goals are, how hands on you want to be and how much risk you want to take.
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