renting out a house to someone and being a landlord is this how it works?

Question

lets say you have a 25 % down payment of a 200 000 K house
so thats 50 000 dollors so you put down 50 grand and the house is yours then 1 year later you sell the house for 260 000

so you get your 50 000 back plus the 60 000 proffit you made is that how it works?

Answer 1

Using your example:

You put down 25% on a 200K house. That means you have a loan for $150K. In 12 months, you will still have a balance of roughly $150K. When you go to sell the house for $260K, you'll probably end up paying another 8% total in real estate commissions and other fees. So that really means you end up with $239,000.

With that you pay off the $150K loan, which means you end up with approximately $89K.

Best to you.

Answer 2

In today's market it is unlikely in most areas that a 200K house will appreciate 60K in one year, but assuming it did, then yes, you will have:

- Paid $50K and financed $150K.

- Your tenants will have paid rent each month, hopefully covering the monthly mortgage and most of the taxes (maybe all, and a little profit)

- If you sell a year later for $260K, then you have made: 260K - 150K (owed) - 50K (down) = $60K profit.

Note that from that $60K profit you have to take out real estate broker fees (typically 6%), so that means $3,600 less. Also, don't forget, that 60K increase is unlikely in most areas for today's market.

Now, that all assumes the house went up 60K, and that you still owed almost 150K after a year, which is close, because most all mortgages you will pay almost all interest the first year.

Answer 3

Yes. Before factoring in brokerage fees, property taxes, interest payments, maintenance, capital gains tax, closing costs, and assuming you can sell it at a 30% gain with little marketing costs. As a landlord I can assure you it's definitely not as easy as it sounds, on the other hand when things do work out, there is a lot of money that can be made.