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.
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?