Is Our Real Estate Profitable?

by Dual Income No Kids on June 7, 2006 · 0 comments

As you may know, Miel and I have an investment property in Washington DC. We both enjoy owning real estate, but we recently got stuck with a special assessment in the amount of $1160.25. In the grand scheme of things, $1160.25 is a LOT of money. So, I thought I would review the profitability of our investment to determine how we are doing.

Just a quick update, there are at least two components to total return when looking at real estate: 1) income 2) capital gains.

Regarding income: After some number crunching, I came up with the following figures from my IRS submissions

Note all the figures given here are basically the same as those reported to the IRS. To be entirely fair, some of the expenses for 2004 and 2005 were a bit higher than those reported here, but not more than three or four hundred per year. I only reported expenses I could substantiate.

Regarding capital gains: I bought the place in 2003 with a cost basis of $130,000. When I last checked in 2005, similarly situated properties were going for $235,000. (It might be worth less now, but we can all dream, so I like the 235k figure). Between the cost basis and last valuation, I refinanced and took out $32,000 in equity. So the pre tax capital gains are (($235,000 – $130,000) – $32,000) or $73,000.

My total return since 2003 has been therefore: $78,336.

Of course, this is a rough figure. The first few months of 2006 have seen interest expenses increase, as well as higher energy bills and lastly the special assessment mentioned earlier.

All in all though, it appears that our real estate venture has done well.

Best,

James

p.s. as always, feel free to leave comments or drop us an email if you’d like to chat!

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