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By-the-numbers: Breaking down a rental home deal

» A Blackstone rental in Tampa with four bedrooms and two baths was listed for $1,500 a month. Blackstone purchased the home for $120,000.

Initial Purchase 2012

Price of home $120,000
Initial repairs and rehab $15,000
Total investment: $135,000

 

Operations, 2012-17

Annual gross rental @$1,500 a month $18,000
Less vacancy, marketing, upkeep and taxes (-$7,700)
Depreciation (paper loss that translates into tax savings) (-$4,363)
Annual net rental income $10,300
Annual return from rent / Cap rate 8.6%

 

Exit Strategy, 2017

Expected sales price $150,000
Net on principal (sales price minus purchase price plus rehab) $15,000
Net rental income (over five years) $51,500
Tax benefit (over five years, assuming 35% corporate rate) $7,635
Total return over five years $74,135
Total return on equity (before capital gains) 11+% per year

 

*This hypothetical example uses sales data, tax records and rental listing for a four-bedroom, two-bath home that Blackstone purchased in Tampa last year. All other figures are estimates based on conversations with experts in the industry.