It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
At one point Biden’s campaign website had a piece about doing away with 1031 exchanges. Is that what you’re referencing with the capital gains tax?
No, WA State legislature enacted a 7% cap gains tax. 1031-exchange is a way to defer taxes in to a new property. But yeah, Biden wants to do away with that.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
Do you know what the word profit means?
Nobody smart is being a landlord to make $100 a month. The amount of risk involved...come on dude. I know the industry inside and out and worked in it for many years.
I’m curious which part of what industry you know inside and out. Because I think you’re missing the boat/train/short bus here.
Why the fuck did I write this out? Because I’m an idiot, that’s why. TLDR: OP made a lot of money.
I’ll let you in on a secret: the $100 month profit was a placeholder for my very rough example estimate. It was just the number necessary to bump it up to a 6% annualized ROI when combined with how much of the principal has been paid off.
The $100 a month “profit“ (let’s call it X) is not the only source of gain. Equity (principal + appreciation) is the other. If you owned the house outright, let’s say you inherited it, then $100 a month wouldn’t be very smart. But that’s not the case now, is it?
The mortgage + maintenance expenses + insurance + property tax is being paid by rent. However much of the principal is paid off + appreciation is your equity. The $X/month is what is left over for your cash profit.
We can calculate some better info with the provided numbers. We’ll go extremely conservative so I can’t be accused of being sugary.
Initial expenses: $168,000 down payment, no closing, $30,000 repairs, $27,000 six months of mortgage and expenses prior to renting.
Total: $225,000
Income: 86 months of $5400/month rent (91 months total rented)
Total income: $464,400 realized (491,400 If paid in full)
Note: we’ve been provided $5400 rent starting in October 2013, we’ll assume OP is the patron saint of renters and that number has remained static, although he said he raised it. OP said they’ve been dragging ass for 5 months, not sure what percentage of rent paid dragging ass qualifies under so I just took out 5,400x5.
View attachment 40282
As you can see I plugged in conservative numbers. I went with the homes assessment as $700,000 for property tax with a 1% tax rate for $7k/year, depending on where it is and assessed value I’d bet that’s close to the current rate and not the starting one in 2013. Homeowners insurance at $3000/year. No HOA was mentioned. I’m assuming no PMI with 25% down, assessed value, and OPs undoubtedly good credit.
That gives us $3,152 as the monthly payment. I’ll add in maintenance at 25% of monthly rent for $4,500 of total expense/month.
At $5,400 revenue/month with $4500 expenses, a profit of $900 month. That’s a bit more than $100 month. $81,900 to date if realized for 91 months.
Five months of unpaid rent is a loss of $22,385 for $59,515 made from rental profit.
Let’s calculate the principal of the loan paid and appreciation profit next.
The amortization table shows us there is $417,375 remaining on the loan. $88,675 of the $506,000 principal has been paid off. That’s your profit before appreciation.
View attachment 40283
Appreciation: as I looked up earlier, the sale price of the median home in King Co went up ~90% over that time span. Let’s go ultra conservative and cut it in half, 45%. A quick look at homes for sale and their historical sales price says that 45% is incredibly low but I’m using it to prove a point. That would be $303,750 if $675,000 was the sale price in April 2013.
(If using 90% the appreciation is $607,500)
Rental profit: $59,515
Principal paid off: $88,675
Appreciation: $303,750
Fed cap gains: -?
Total: $451,890[/b]
An initial investment of $225,000 created $451,890 of profit over 91 months under a very conservative scenario. That’s about $5,000 for every month of ownership. The increase in home value is responsible for 2/3 of that, but even with that removed it would be ~$1,650 per month.
Note: I don’t have enough info to figure out OPs capital gains tax, and what I read real estate is exempt from Washington’s tax, if it is upheld as constitutional it goes into effect in 2022 and OP is selling now. I didn’t bother with inflation.
Did you get help from @TheChart on this post?
View attachment 40308
This is the only @TheChart that I’m aware of, and it’s the only one that matters. He needs to do real estate markets next, make sure the 2022 recruits get it.
LOL
@DJDuck
