The market has been pretty competitive over the last year, and hopefully, you’ve been able to leverage that to meet your own investment goals. In order to really understand your performance, you have to know how to analyze your ROI. If you are renting out single-family homes in San Antonio, we have some tips on how you can do that and what you should be looking at when you’re determining the strength of a specific or even a potential investment property.
This is a rather general overview, based on our experience in the market. We’d be happy to analyze your specific investment property or portfolio, so reach out when you want customized information on your own ROI.
How Does ROI Impact your Investment Goals?
Before you can effectively analyze your ROI, you need to know how to define success. Are you investing in San Antonio single-family homes for cash flow, appreciation, or both? In your best-case scenario, your single-family home will earn both positive cash flow and provide appreciation potential. Most investors, however, are weighing one factor more than the other. Establish your investment goals if you haven’t already. That’s going to drive how you analyze your earnings.
Cash Flow: How to Analyze ROI from Rental Income
If cash flow is the most important goal, add up all of your monthly or annual expenses, including your mortgage and taxes, property insurance, and the reserves you may be putting aside to cover unexpected vacancies and maintenance. Subtract that number from your monthly or annual income. The result is going to show you whether you’re earning positive or negative cash flow.
This is short-term ROI. It may seem counter-intuitive to feel like your investment is successful when you’re falling into negative cash flow but remember – investing in single-family homes is often a long game. A lot of investors will not be worried if the cash flow isn’t huge. They’ll analyze their ROI in other ways.
Appreciation: How to Analyze ROI for Long Term Growth
Appreciation is the increase in value your property experiences from the time you make the purchase to the time you decide to sell. Right now, your property value is probably much higher than you expected, whether you bought the house five years ago or 20 years ago.
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.
The San Antonio rental market is attractive to investors because when done correctly, it’s possible to earn both cash flow and appreciation. If you’re already earning some cash flow on your single-family home, the appreciation may seem like a bonus. If you care more about appreciation and you find that the current market allows for climbing rents, you can expect to increase your cash flow year after year.
Analyzing cash flow for your specific property and in accordance with your specific goals is an important part of what we do. For more tips and advice on San Antonio property management, please contact us at OmniKey Realty. We work with rental property owners in Dallas, Houston, and surrounding areas in Dallas County, Collin County, and Houston County.