The FYI on the ROI of a future rental property

Published April 27, 2022
by Better

"The FYI on the ROI of a future rental property

Here’s a look at the latest developments in the mortgage market this week.

Finding the right rental property

Finding the right rental property

If you’re looking to buy a property to rent out, should you buy a fixer-upper or a move-in ready home? It all boils down to your return on investment (ROI).

A good ROI for a rental property is typically more than 10%, but 5%–10% can also be acceptable. But the ROI may be lower in the first year, due to the upfront costs of buying a home.

A fixer-upper may offer more upfront savings as their average list price is 25% lower than turnkey homes.

Homeowners looking at a 29.3% year-over-year increase in home equity can use a cash-out refinance to pay for their first investment property.

How to buy the right rental property

👀 Look for a home with your ideal tenant in mind. Know how much rent they would want to pay and what they expect from a home.

Use an ROI calculator to make sure the home you’re considering will likely generate the profits you’re after.

Prepare an emergency fund. You’ll need to be ready to cover the cost of repairs, ongoing maintenance, or lost rent when the home is vacant.

Considering a home loan?

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