Understanding your rate of return when looking at investment properties in Worcester County Ma.
Arriving at a Rate of Return is an important factor to consider when looking at a potential property. Analyzing an investment property requires asking the owner pointed questions regarding income and expenses. Some of this information can be provided by your realtor, who has access to local tax records and listing sheet data. Income sources are generated by tenant rents and available services such as coin-op Laundromats. While including typically known expenses such as taxes, water, sewer, and utilities do not make the mistake of forgetting other items such as insurance, property management fees, vacancy rate, maintenance and capital improvement percentages.
if you purchase a property incorrectly without analyzing expenses you could end up in a financial mess. ROI is a popular metric because of its versatility and simplicity. It’s used to evaluate the profitability of an investment
Total Income less expenses will provide you with your net operating income. Continuing with your analysis your data should also include your total financial investment which includes your down payment, finance costs, and any acquisitions that were part of the purchase of the property along with your yearly mortgage costs. The rate of return is calculated by adding your net operating income and your yearly mortgage then dividing by your total investment amount. The rate of return gives you an idea of what kind of return you will be getting on the amount you invested.
