Rents Don't lie. This a timeless old adage of real estate and it always holds true, even today. When I look at the value of my home and what it could rent for, I have to ask if the price it is selling for warrants me selling it.
If I look at Zillow, they value my home at $648,000 and give a me a rent estimate at $3,200 per month.
If someone came along and hypothetically paid cash for my home and then rented it out for $3,200 per month, what would their return be?
$3,200 x 12 is $38,400 per year gross rent
Less $4,000 per year in taxes and insurance and another $2,000 for maintenance and vacancy, there would be a net income of $32,400 and that is exactly a 5% return.
Not a bad investment, especially considering there is a tax benefit for depreciation and a good chance for appreciation.
