A 1% House is a 9% Return? 

How does that happen?

A 1% house collects rent equal to the amount invested in the purchase and initial rent-ready repairs. If you spend $200,000 and collect $2,000/month rent, the house is a “1%-er.” So how does that mean a 9% return?

First keep in mind these numbers are pro forma - your actual results will vary. In general, the average expenses for single family residential properties will equal 25%. With that in mind, let’s do the math. 

• $2,000/mon for a year = $24,000 in gross income. 

• $24,000 - 25% for expenses = $18,000 in net income. 

• $18,000 divided by $200,000 = .09 or 9% cash on cash return. 

Stay tuned for lots more on “returns.”