Miami takes #1 spot out of 30 cities to invest in real estate according to a research study by the University of California Los Angeles (UCLA). More specifically, the study refers to the cash flow rate of return on rental investments compared to other cities like Los Angeles or New York.
Looking to buy an investment in Miami? You can expect an average of 5% cash flow return from rental income. Add to that price appreciation when it is time sell, things can get even more attractive.
For example, say you buy a rental property for $300,000. A five percent return on that investment would be $15,000 after all paid expenses except for Uncle Sam. Typical costs are repairs, insurance, property taxes, property management fees if you hire a vendor to take care of the property, etc.
The above expample is for a cash purchase. If you got a loan to purchase the property, the calculations would change a bit. For the same $300,000 property, say you got a $150,000 loan. A 5% return on investment would be based on $150,000 cash you put down to buy the property since the return on investment (or ROI) is calculated based on how much of your money you are using.
With a loan, expenses remain the same, but you now have to add the mortgage payments to the overall spending.
For some, 5% return may not be a figure to celebrate. But when compared to other types of investments, it’s a pretty good statistic. Let’s look at the stock market. If you know what you are doing, you can earn between 7% and 12% return. However, when you account the risk involved, real estate becomes much more appealing given that real estate is a much safer bet.
Other cities to invest in real estate
Among the 30 cities in the study were Tampa, Pittsburg, and Houston.
Thought about investing in Miami real estate? Comment your questions!
Source for this post: Study: How does real estate compare to other investments?