Most real estate investors know that they’re making
money on their properties, but how do you know what
you’re actually earning?
Calculating ROI or Return on Investment is a crucial part of
investing in Oahu rental homes. At Elite Pacific Properties,
we’ve been leaders in the Oahu real estate market for
years. We help owners and investors understand what
they’re spending and what they’re earning on their
investment homes all the time.
Today, we’re taking a high-level look at how you can
analyze the return on investment you’re earning with
your single-family property. We’d be happy to analyze
your specific investment property or portfolio, so contact us
for some customized information when you’re ready.
Calculating and Analyzing ROI in Oahu
Measuring your ROI is important because it shows you how much
money you’re earning on your
Oahu investment property. This will help you make decisions about your current and
future investment goals.
To calculate your ROI, you will need to first analyze how you
purchased the home. If you paid in cash, you’re already
at a great starting point. You’ll simply look at your
net profit or the gains you made on your investment and then
divide it by the original cost of the property. If you have a
mortgage, you’ll follow the same formula but
you’ll also have to factor in what you put down on the
purchase and what your monthly mortgage payment is.
Including Expenses and Other Variables
Many of the fixed expenses are easy to analyze when
you’re calculating your ROI. The cost of your mortgage,
for example, and the taxes and insurance you pay are fixed.
They will make your math simple.
There are variables, however. Maintenance is the largest
variable and can really make understanding the ROI for your
property complex. What you spend on emergency repairs, routine
maintenance, and preventative inspections will add up and have
to be deducted from the gains and profits you earn. Remember
that these costs may look like losses on paper, but when
you’re preserving the condition of your asset and
increasing its value with the work you do, the ROI will be
ROI Matters for Oahu Single-Family Rental Properties
Understanding your ROI will help you make informed investment
decisions. Before you invest in a single-family home,
you’ll want to estimate your costs against your
earnings. This allows you to compare several potential
investment properties to one another. You never want expenses
to exceed ROI potential, so if you’re losing money on an
investment, analyzing your income and returns will help you
decide whether you can turn the property into something that
earns money or whether it’s better to sell and get out
before you lose more.
With rental properties, financing plays a different type of
role in calculating and analyzing ROI. When you put less money
down, you have a higher mortgage, and yet you’re likely
to have a higher ROI. Paying a larger cash deposit will lower
your ROI because those initial costs will be much higher.
Unless you’re an experienced investor (and even if you
are), understanding what you’re really earning on your
single-family Oahu investment property can be complex.
We’re here to help, so
at Elite Pacific Properties.