In this post, lets calculate the capital gains if we were to purchase this Austin  investment home.

• HUD home in NW Austin
• 3 bed 2 bath 2 car garage
• 1284 sq ft
• 1 story
• Built in 1976

Lets estimate capital gains on the purchase.  Here are the relevant stats:

• List price: $117,000
• Market value: $140,000
• Repairs/makeready: $5,000
• Closing costs: $3,725

Market value – Purchase price – Closing costs – Repairs = Capital Gain

$140,000 – $117,000 – $3,725 – $5,000 = $14,275 Capital Gain

Using conventional financing at 25% down, lets calculate how much cash we need to get this property ready to rent.

Down payment + Closing costs + Repairs = Cash Out of Pocket

$29,250 + $3,725 + $5,000 = $37,975 Cash Out of Pocket

What this means is we have a

Capital Gain / Cash Out of Pocket = $14,275/$27,975 =

37.6% return on our cash!

Yes, this is a very simplified exercise.  No, we didn’t talk about where some of the numbers came from, like the market value or the repair costs.  But now we have a good overview of how to evaluate capital gains.

Have any questions?  Leave a comment below!