Home Buying in Chicago>Question Details

Joe, Home Buyer in Humboldt Park, Chicago...

Is their a normal percentage amount an owner should get in profit on a rental property.....?

Asked by Joe, Humboldt Park, Chicago, IL Tue Jun 18, 2013

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NO!!! The rental market rate is not tied to your property carrying costs. If you already own the property, then you need to maximize rent and watch expenses and take all your tax deductions.

If you are looking to buy a property you can determine for yourself what you realistic and desired return on investment (ROI) should be to make it worth your wild. We can no longer rely on property appreciating every year to even out any loses, and losses do happen. Plus, you have to factor in the cost of carrying the property, updating the property, maintaining the property and managing the property.

Look for a real estate professional that is an expert in the area of the city you are interest in buying in. Talk to a financial professional about a realist ROI and find properties that could deliver that, factoring your total cost versus market rental rates. Be prepared to have a net loss for the early years.

I hope that is not too technical I am a real estate broker and a CPA.
1 vote Thank Flag Link Tue Jun 18, 2013
If this is your first rental property, I would suggest that you focus on your cash on cash return. Their is an opportunity cost in investing your money in real estate. You want to make sure that this is the best use of your hard earned money. Let me know if I can help.
0 votes Thank Flag Link Wed Jun 19, 2013
Really there is no set rate for what you get back.
0 votes Thank Flag Link Wed Jun 19, 2013
It can depend on what you want to receive for the work you are doing/what other similar properties are getting in return(ROI)/how long you plan to hold the property/what else would you do with the money you are spending to buy the property/etc
0 votes Thank Flag Link Wed Jun 19, 2013
This really depends on the value of the property and the demand for rental properties in certain areas. There are areas where properties values are depressed and there is high demand for rentals. Properties in these areas can be acquired at low prices thus increasing the return on investment and subsequently the net profit. On the other hand there maybe areas where property values are high and the net return or profit on actual rental income is low but appreciation in value of the properties is much higher.
0 votes Thank Flag Link Wed Jun 19, 2013
It is all about risk and reward. You may get a very high rate of return by going into neighborhoods with high demand for rentals and very illiquid property.
You may have a high capital commitment a low rate of return, but liquid and increasing in value.
You have to evaluate your tolerance for risk and do your homework on price, area, demand and expense.
0 votes Thank Flag Link Tue Jun 18, 2013
This is a question that one cannot answer as it is all dependent on the property however a savvy investor wants to land in a 7%+ CAP rate.



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0 votes Thank Flag Link Tue Jun 18, 2013
Joe,

Not really Joe. It really depends on how you purchased the property. Usually profit is made during the purchase. If you owe a lot on the property you may make $50.00 a month. If it's paid off you can make up to or over 85% of the rent amount.

Respectfully,

Gordon Parker
0 votes Thank Flag Link Tue Jun 18, 2013
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