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Here's an real case used as an example of calculating annual return rate before:
House price 270k, rent $1850 purchased at 2005
Original 20% down 80% mortgage at 5%, PTPI $1300
Now refinance ctake cash out. mortgage 315k at 6.375% PTPI %2205
Suppose take less mortgage @ 270k, PTPI would be $1850, that's a even-cash flow with 0 investment (more or less, didn't count the 2 years interest of the downpay and maitenance cost). Any rent increase less maintenance, paid principle in mortgage, or house appreciation, will be the return.
The ROI? A sleeping 8 - ∞. That's a cash cow no need to feed hay to it.
True, it's an extreme case not repeatable for every property, but I bet lots of long term RE investors have some holdings like this after a few years. |
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