Net Profit and Rent Increase Over 10 Years?
I bought a brownstone recently for 1.8 and it has 4x 2 bedrooms in prospect heights in brooklyn. what should I expect in 10 years as net profit if i resell it and can i expect realistically arent increase 2% a year?
I bought a brownstone recently for
1.8 and it has 4x 2 bedrooms in prospect heights in brooklyn.
what should I expect in 10 years as
net profit if i resell it and can i expect realistically arent increase 2% a year?
When I bought my brownstone in park slope back in 1991 the average rent I was getting for a 1 bedroom apartment was $500 per month. I speculated that in 10 years time I should get about $750 per month and the building will be worth 35% more then what I paid for it.
Fast forward 10 years and rents shot up as well as the value of the building. If you can hold on to the place for 10 years I am sure you will be well ahead of the game. Keep your tenants happy, address all problems right away, and maintain the classic details of the brownstone.
…….all the best.
Seems these are questions you would have thought about prior to purchase.
Your net profit = sale price – closing costs (broker commission) – cost basis
While you own it you also have some cash flow (rents – debt service – expenses) which is a yearly profit (loss) before tax and probably a loss after tax if you depreciate the investment property.
If I’m evaluating potential investments I generally assume both rents and property value will increase by 2-3% annually along with inflation. Of course it depends whether rents are regulated or not, at or below market, etc. What inflation will actually be, and whether a specific property value changes more or less than inflation depends on all kinds of things.
Let’s break it down:
– You paid 1.8mil
– Rents: the going rate for 2br in the area is $2500 to $3000 so 4 x 2br apartments should bring 12k month tops. (and, as grand army noted before me, probably less if you want good tenants, which you really want.)
– Cost of the capital: the 1.8mil at 6% 30 years is costing you about 10k month (the size of the down payment doesn’t matter, if you used your money, you are loosing out the gains you could have made in a different investment)
– Re Taxes must be an other 1k+ month
– Add insurance, repairs, vacancies, renovations, broker fees, utilities, bed bug removal, water bill, etc…
It looks to me you are breaking even at best. The only way you will be making money is if the building appreciates. And even so, given the closing costs to buy, the selling costs (6% broker for one), you will break even even if the property appreciates 1% each year. Not to forget that since this is not your primary residence, you will have to pay taxes on all capital gains.
The only scenario where you will win, is high inflation. In that case your investment will be protected, just as if you had bought gold. Only with a lot more head hakes…
All this said, i again agree with grand army: “No one can tell you what your house will be worth in 10 years”. I would only add that the chances of the value of the building growing significantly more than inflation are statistically low.
No one can tell you what your house will be worth in 10 years.
As to rent increases, many owners of 2-family brownstones balance the size and frequency of increases against the desire to keep good tenants in place. However since yours is a 4-family so perhaps closer to a commercial landlord situation (and it’s not clear if you are living there yourself), I guess you can do whatever you like. But raising the rent every year is likely to create high tenant turnover which in itself costs time and money.
are you asking the price of your house in 10 years time?
call miss cleo.