“Buy–Rent–Sell” Model: How to Calculate Total Profit

Buy–Rent–Sell Model: what it means 🏡

The buy–rent–sell strategy is simple in idea: buy a property, rent it out, then sell. In practice, net profit depends on many components beyond purchase and sale prices. This guide gives a clear formula, scenario planning, and practical tips to estimate realistic returns and manage risks.

Main elements of profit 🧾

• Acquisition cost: purchase price plus all buying fees (agent, legal checks, registration).
• Renovation and furnishing costs to make the property rent‑ready and attractive for resale.
• Holding/operational costs during ownership: utilities, condo fees, repairs, property management, insurance, taxes and vacancy periods.
• Rental income received while you own the property — net of management and operating costs.
• Selling costs: agent commission, staging, legal fees and any taxes on sale.
• Sale price — consider conservative, base and optimistic scenarios.

Simple formula to calculate profit ➕➖

Net profit = Sale price

• (Purchase price + acquisition costs + renovation + total holding/operating costs + selling costs)
• Net rental income during ownership

Use this as a spreadsheet template. Breaking every line into monthly or annual figures makes sensitivities clearer.

How to estimate each line — practical tips 🔍

1. Acquisition costs

   • Include every fee: agent, legal, registration. Add a contingency for unexpected checks or corrections.

2. Renovation and furnishing

   • Split into phases: essential fixes, aesthetic upgrades, furniture. Estimate how much each phase will increase rent and resale value.

3. Holding costs and vacancy

   • Be honest about vacancy risk. Model a moderate vacancy allowance and potential large repairs.

4. Rental income

   • Model gross rent, then subtract property management, utilities you cover, routine maintenance and taxes to get net rental income.

5. Selling costs

   • Account for agent fees and expenses to prepare the property for sale; these reduce final proceeds.

6. Taxes and regulation

   • Tax treatment affects net profit. Consult a local accountant to include all relevant taxes legally and accurately.

Scenario planning — why it matters 📊

• Conservative: low price growth, average occupancy — profit may be modest or break‑even once all costs counted.
• Base: stable market and steady rent — renovation recoups through rent and resale.
• Optimistic: strong demand and price growth — higher profit but also higher operational intensity.

Model all three to see the range of outcomes and decide whether the risk/return profile fits your goals.

Metrics to calculate 📈

• Total net profit — final dollar amount from the formula.
• ROI (return on investment) — net profit divided by total capital invested.
• Annualized return — useful to compare with other investments.
• Cash‑on‑cash yield — if financing is used, this shows annual cash return vs. cash invested.

Practical ways to improve returns and reduce risk ✅

• Choose locations with steady rental demand and infrastructure.
• Control renovation costs and focus on durable finishes that reduce future CAPEX.
• Use a professional property manager to reduce vacancy and protect the asset.
• Legally optimize taxes with professional advice.
• Time the exit: avoid selling in a market downturn if you can hold through a recovery.

Quick checklist before you buy ✔️

• Do a full legal title check.
• Run the numbers using the formula and at least two scenarios.
• Estimate realistic rental income and vacancy.
• Evaluate management and exit options.

Final thoughts — be realistic and plan for flexibility 🤝

Buy–rent–sell can deliver attractive returns, but success depends on realistic cost accounting, careful market scenarios and professional management. Use the formula and scenario approach to make objective decisions.

If you’d like help running the numbers on a specific property or finding properties in Batumi and across Georgia, contact BuyHome for a friendly consultation — we’ll help you choose the best option and estimate potential returns. 🌟

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