During the last few weeks I have been reading on rental yield and other rental finances questions.
I own a property that I have been keeping above the water by putting money into it. The mortgage payment is about 17% more than my rental income. This does not include maintenance costs.
The reason I have been keeping the property is because the economy in that region is very weak and probably the condo value has lost 2-5%. So I thought to keep it around until (a) I need need it back for myself or (b) the market improves.
The property has been rented for the last 3 years without any glitches.
I am looking to learn the basics of rentals in term of finances so that I can make a good decision. What are the basics of apartment rental finances? Any formulas, Excel spreadsheets or other material is also appreciated.
Example 1:
Assume there is no mortgage payment. For sake of simplicity let's say the value of the property is $100,000. 8% year return on that investment is $8,000 a year. Using @Chad formula below - $666.67 (8%/12 of investment) + Monthly Costs = Rent you need to charge.
Based on the example above - If I want to know the return on investment for $100K income home - the formula will be
(monthly rent - monthly costs)/(home value)* 12 months = Yearly % of Return
Is this a correct assumption?