Purchase Price: $100k. 20% down payment: $20k

Monthly Gross Rent: $1200. Vacancy rate: 5% ($60). Monthly Net Rent: $1140

Management and leasing: $120. Insurance: $50. Taxes: $100. Repairs: $50. Capex: $210. TOTAL EXPENSES: $530

Mortgage owed: $80k. Monthly Payment with 4.5% interest and 30-year fixed mortgage: $410

$1140 Net Rent - $530 Total Expenses - $410 Mortgage Payment = $200 Cashflow Per Month

Monthly Loan Paydown: $100. Monthly Appreciation if Housing Market goes up 3% per year: $250.

Annual cashflow (passive income): $2400. Annual equity from loan paydown and appreciation: $4200. Cash-on-cash return $2,400 / $20,000 = 12%. Return on equity (2,400 + 4,200) / 20,000 = 33%.

Not all rental properties are good opportunities with positive cashflow. You can lose money if you make the wrong investment, don't manage it well, or run into bad luck. You must be selective and run your own numbers before investing to make sure that it will make enough money to be worth the investment, risk, and time!

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