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!