How to Calculate Rental Yield So You Can Make a Smart Investment

This week the guys get nerdy about the numbers and chat about how to calculate cash on cash return to see if a property will be a smart investment.  Is This a Good Investment?  If you’ve been talking about buying a rental property with friends and family, there was probably someone who told you some horror story about owning rental property. Before letting them scare you out of it, do the math. It’s important not to make an emotional decision when buying a rental property. Instead look at the numbers and have systems in place to protect you. Some of us are just not numbers people (including myself). Although real estate investment math isn’t calculus, there are a lot of calculations involved. Don’t worry; we’re here to help. Cash On Cash Return The cash on cash return is a simple way of measuring the performance of a potential investment property that is quick and easy. It can be a good starting point for quickly filtering potential investment properties. Cash-on-cash return = annual pretax cash flow / total cash invested. For example, if you put $100,000 cash into the purchase of property and the annual pretax cash flow is $10,000, then your cash-on-cash return is 10%. Cash-on-cash return is the actual return you will get at the end of the year your rental property after all property specific expenses are paid out like mortgage, taxes, insurance, HOA, etc. It’s a great metric to determine if a property will be a good investment right off the bat and a quick, easy way to compare different properties. Although cash on cash return is a useful back of the napkin evaluation, there are many other essential calculations to take into consideration. Yup, more math. We’ll Do The Math For You Unless you enjoy getting elbow deep in nerdy spreadsheets, we have something that will do all the math for you. Simple Wealth is a platform that will help you research, evaluate and track rental properties. It not only will it calculate your cash on cash return, it will also help you understand your properties income, app