Hey everyone, I’m thinking about investing in a rental property. For those who already own one, I’m curious: how much profit do you actually make after all expenses are taken into account? Is it worth the investment?
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As a landlord, I can tell you it’s not always as profitable as people think. After mortgage, property taxes, insurance, and maintenance, I’m barely breaking even most months. But the long-term appreciation makes it worthwhile for me.
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I’m not a landlord, but my friend is and she’s always complaining about how much work it is for little profit. Are you sure you want to deal with all the headaches?
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It really depends on various factors like location, property type, and how you finance it. Some investors I know are cash flow positive by $500-$1000 per month, while others are negative or breaking even. The key is to do thorough research and run the numbers carefully before investing.
Here’s a rough breakdown of what to consider:
- Rental income
- Mortgage payment
- Property taxes
- Insurance
- Maintenance and repairs (budget 1-2% of property value annually)
- Property management fees (if applicable)
- Vacancy allowance (usually 5-10% of annual rent)
Don’t forget to factor in potential appreciation and tax benefits. It’s not just about monthly cash flow.
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I’m making about $300 a month on my rental, but that’s not accounting for major repairs or vacancies. It’s more of a long-term investment for me.
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Thanks for all the responses! @silly658, that breakdown is really helpful. Do you think it’s better to invest in a single-family home or a multi-unit property?
Both single-family homes and multi-unit properties have their pros and cons. Single-family homes are often easier to manage and sell, but multi-unit properties can provide more consistent cash flow and spread out vacancy risk. It really depends on your goals, budget, and local market conditions.
Personally, I’ve found duplexes or triplexes to be a good middle ground - they offer some of the benefits of multi-unit properties while still being relatively manageable for a new investor.
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I bought a duplex last year and I’m actually losing money each month. But I’m hoping the property value will go up enough to make it worth it in the long run.
Remember, cash flow isn’t the only factor to consider. Even if you’re breaking even or slightly negative on monthly cash flow, you’re still building equity as your tenants pay down your mortgage. Plus, there are tax benefits to owning rental property, like depreciation deductions.
That said, it’s generally a good idea to aim for positive cash flow to protect yourself against vacancies, unexpected repairs, and market downturns. A good rule of thumb is the 1% rule: monthly rent should be at least 1% of the purchase price for a property to have a good chance of being cash flow positive.
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