Learn the shortcuts to evaluate rental property performance.

Investing in real estate offers a valuable hedge against inflation, along with the potential to build long-term wealth and passive income for retirement. Today, I'd like to discuss some straightforward methods to determine the performance of a rental property.

The assessment of whether a property is a good or bad performer depends on your individual financial goals. However, there are a few quick and easy measures you can use. One such measure is the return on investment (ROI) or cash on cash return. This involves dividing the pretax cash inflows from the rental property by the amount of cash you've invested.

To illustrate, if your rental property generates $10,000 in pretax cash inflows and you've invested $100,000 in acquiring the property, your ROI would be 10%. This is a simple way to gauge the performance of your investment. Another method to evaluate a rental property is the 1% rule. It's quite straightforward: if you purchase a $100,000 property that rents for $1,000 per month, you would achieve a 1% return on investment.

“Investing in real estate offers a valuable hedge against inflation.”

While the 1% rule may not apply perfectly in our market, our strong asking prices and favorable price-to-rent ratios make it an effective strategy. Investing in real estate allows you to diversify your portfolio, safeguard against inflation, and generate long-term wealth and passive income for your retirement.

If you need assistance in evaluating a rental property or determining if it aligns with your investment strategy, please don't hesitate to call or email us. We are here to provide guidance and support.