THIS HOME AS AN INVESTMENT
Although the property could be used solely as a family home, it has great investment potential. As a rental property with two units currently available, with a third by second quarter 2013, the potential for both rental income and capital appreciation can be very attractive. This is especially true with such low rates of return from banks and government bonds.
There are really few rentals available in Pozos currently. One, a small one bedroom casita rented for $600usd pre month utilities included. The other a one bedroom casa rents for $500usd per month plus utilities. This would be another advantage to invest in this property: the scarcity of rentals.
Based on the current purchase price and the purchase price after completion of the third unit, returns on investment can range from 92% to 125%. In other words, from almost double to somewhat more than double the original investment. This constitutes an annual return of around 7% without compounding or reinvestment of returns. Considering current bank yields of 1.5% or less and the volatility of the stock market, this property can be an attractive investment.
| Current Purchase Price $205,000 | Purchase Price after Completion of Third Unit $270,000 | |||||||||||||
| US Dollars | US Dollars | |||||||||||||
| Estimated 2Q2013 | ||||||||||||||
| scenario | scenario | |||||||||||||
| rent: | #1 |
#2 |
#3 |
#4 |
#5 |
#6 |
rent: | #1 |
#2 |
#3 |
#4 |
#5 |
#6 |
|
| unit #1 | 400 | 500 | 400 | 500 | 400 | 500 | unit #1 | 400 | 500 | 400 | 500 | 400 | 500 | |
| unit #2 | 400 | 500 | 400 | 500 | 400 | 500 | unit #2 | 400 | 500 | 400 | 500 | 400 | 500 | |
| unit #3 (Upon completion) | unit #3 (Upon completion) | 400 | 500 | 400 | 500 | 400 | 500 | |||||||
monthly total |
800 | 1,000 | 800 | 1,000 | 800 | 1,000 | monthly total |
1,200 | 1,500 | 1,200 | 1,500 | 1,200 | 1,500 | |
| annualized rent | 9,600 | 12,000 | 9,600 | 12,000 | 9,600 | 12,000 | annualized rent | 14,400 | 18,000 | 14,400 | 18,000 | 14,400 | 18,000 | |
| Occupancy Rate | 100% | 100% | 90% | 90% | 80% | 80% | occupancy rate | 100% | 100% | 90% | 90% | 80% | 80% | |
annual rental Income |
9,600 | 12,000 | 8,640 | 10,800 | 7,680 | 9,600 | annual rental Income |
14,400 | 18,000 | 12,960 | 16,200 | 11,520 | 14,400 | |
| Expenses: | Expenses: | |||||||||||||
| taxes | 200 | 200 | 200 | 200 | 200 | 200 | taxes | 200 | 200 | 200 | 200 | 200 | 200 | |
| insurance | 250 | 250 | 250 | 250 | 250 | 250 | insurance | 250 | 250 | 250 | 250 | 250 | 250 | |
| total owner expenses | 450 | 450 | 450 | 450 | 450 | 450 | total owner expenses | 450 | 450 | 450 | 450 | 450 | 450 | |
net annual rent before utilities |
9,150 | 11,550 | 8,190 | 10,350 | 7,230 | 9,150 | net annual rent before utilities |
13,950 | 17,550 | 12,510 | 15,750 | 11,070 | 13,950 | |
| utilities | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | utilities | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | |
Net annual rent after utilities |
4,150 | 6,550 | 3,190 | 5,350 | 2,230 | 4,150 | Net annual rent after utilities |
8,950 | 12,550 | 7,510 | 10,750 | 6,070 | 8,950 | |
| rental income percentage | 4.46% | 5.63% | 4.00% | 5.05% | 3.53% | 4.46% | rental income percentage | 5.17% | 6.50% | 4.63% | 5.83% | 4.10% | 5.17% | |
| percentage if tenant pays utilities | 6.90% | 8.07% | 6.43% | 7.49% | 5.97% | 6.90% | percentage if tenant pays utilities | 7.02% | 8.35% | 6.49% | 7.69% | 5.95% | 7.02% | |
| Return on Investment (Without Reinvestment): | Return on Investment (Without Reinvestment): | |||||||||||||
| initial investment | 205,000 | 205,000 | 205,000 | 205,000 | 205,000 | 205,000 | investment | 270,000 | 270,000 | 270,000 | 270,000 | 270,000 | 270,000 | |
| capital appreciation: | capital appreciation: | |||||||||||||
| 10 yrs @2.5%/yr | 56,375 | 56,375 | 56,375 | 56,375 | 56,375 | 56,375 | 10 yrs @2.5%/yr | 74,250 | 74,250 | 74,250 | 74,250 | 74,250 | 74,250 | |
| 10 yr total rent - not reinvested | 91,500 | 115,500 | 81,900 | 103,500 | 72,300 | 91,500 | 10 yr total rent - not reinvested | 139,500 | 175,500 | 125,100 | 157,500 | 110,700 | 139,500 | |
| total proceeds after 10 yrs | 352,875 | 376,875 | 343,275 | 364,875 | 333,675 | 352,875 | total proceeds after 10 yrs | 483,750 | 519,750 | 469,350 | 501,750 | 454,950 | 483,750 | |
ROI |
72.13% | 83.84% | 67.45% | 77.99% | 62.77% | 72.13% | ROI |
79.17% | 92.50% | 73.83% | 85.83% | 68.50% | 79.17% | |
| 10 yrs @5.0%/yr | 112,750 | 112,750 | 112,750 | 112,750 | 112,750 | 112,750 | 10 yrs @5.0%/yr | 148,500 | 148,500 | 148,500 | 148,500 | 148,500 | 148,500 | |
| total proceeds after 10 yrs | 409,250 | 433,250 | 399,650 | 421,250 | 390,050 | 409,250 | total proceeds after 10 yrs | 558,000 | 594,000 | 543,600 | 576,000 | 529,200 | 558,000 | |
ROI |
99.63% | 111.34% | 94.95% | 105.49% | 90.27% | 99.63% | ROI |
106.67% | 120.00% | 101.33% | 113.33% | 96.00% | 106.67% | |
| NB: Calculations Are Made Without Reinvestment | NB: Calculations Are Made Without Reinvestment | |||||||||||||