Buying an investment property? Use this equation to determine if it’s profitable.

Should you put your money into that rental property you’ve been eyeing? There is a formula that’s very important when buying an investment property called the cap rate equation. It will help you determine your rate of return.

First, determine the income your property is making you per year. Next, subtract the property taxes, insurance, HOA fees, and maintenance costs. The figure you get is called your net operating income. Divide your net operating income by the market value of the house. This final figure is your rate of return. A good rate of return is typically around 7% to 10%.

If you have any questions, don’t hesitate to touch base with me via phone or email. I look forward to helping you.