Your ROI (return on investment) is one of the most important things you need to consider if you want to do well with your property investment.
If you are considering buying some condos in Nashville, you’re in luck because the ROI in this city is excellent compared to plenty of others across the country. Have a look at what you need to know about your return on investment percentage and what Nashvilees looks like compared to other cities.
What is an ROI, and what does it mean?
When you purchase an investment property, you want to be able to profit from it. Whether it comes to a rental profit or a profit from reselling, you want to crunch the numbers so you can see if it’s worth what you are about to pay. The most common way to calculate this is by using the following formula.
(net income/ investment cost x 100 = ROI %)
Let’s say you buy a home for $150,000 cash after all of the fees and extra costs. If you sell the home one year later at $250,000 after paying zero fees for upkeep, then your income will be $100,000.
$100,000/$150,000 x 100 = 66%
This means you had a 66% return on your investment which is a 66% annualized ROI, as it only took a year to unload it. Suppose it takes longer to sell, then your return percentage will drop more and more every year. A good ROI for condo investments is in the 10% range, but it will be lower for cash-on-cash returns.
The condo market is booming, and there are new buildings in the works all the time. The ROI for Nashville is challenging to calculate as they have gotten such tremendous growth regarding new properties in the last few years, with a whopping 45% boost in housing inventory just last year. Housing prices in Nashville are also growing, which has led many people to consider renting a condo.
You also have to consider all of the significant tax breaks that you may be able to claim as an investment property owner, including maintenance costs, legal fees, travel expenses for your property, and even property management fees. These are just some of the great benefits of owning investment properties in Tennessee.
The best way to figure out if a property you like will give you a good ROI is by talking to a financial expert or a realtor with good knowledge of investment properties. There are so many factors, like increased property value, upgraded capital, and a nice profit, that can make an investment suitable for you in the long run, even if the ROI is low.
The cash on cash return for long-term rental properties in Nashville was 2.72% in 2021. This is a great rate compared to other cities like Chicago (1.58%), San Diego (1.91%), Las Vegas (2.48%), and Washington (2.53%). Have a look at some of the great condos in Nashville today to see if any of the properties are a suitable investment for you.