What you have calculated out may be correct. But 1k rent on a 250k investment sounds terrible to me. My duplex cost me 175k and I pull $2,200 a month out of it in rent. That was the only thing that really stood out to me.
I agree that 1k rent of a 250k investment is most likely too low of an assumption. In my neighborhood the 250k place (down the street) would easily rent for $1,300 a month after HOA dues.
Area dependent of course, but you might also want to consider a duplex, triplex, or quad. Anything 4 units or under is not considered a commercial property. There seems to be an absolute floor on rental prices in most areas (just an observation) and many of these multi-family homes are near there. For example I just randomly pulled up this example: http://www.realtor.com/realestateandhomes-detail/2203-Landmark-Ct_Arlington_TX_76013_M85319-87676
These particular units are renting for $540 a month or $2160 a month if all of them were rented at the same time. Assuming a 25% margin of safety, that's 1,620 a month.
Too good to be true? Maybe. I have no experience buying or selling rental property.
Bichon Frise wrote:
-10% operating costs + 1 month's rent (to represent the amount of time the place is vacant), on average
What are your assumptions on operating costs? I believe that I have read somewhere that a safe margin of error when estimating the amount of time the rental will be vacant is 20%. This may or may not be in line with your estimate depending on your operating costs.
Bichon Frise wrote:
I would first like to ask the community if they see any flaws analysis method? I figure most people, if they put $50k down on place would calculate ROI based on that, and not the entire $250k invested.
I believe to calculate your ROI you need to add your down payment amount, maintenance costs, principal and interest. Basically any money you put into the place. At the end of the 30 year term it will be much more than the 250k acquisition price. Earlier in the term it will be much less, but always more than the 50k down payment.