Advice needed on possible first rental property.

[Heajin Kim]

Hi Guys

I am trying to buy my first rental property.

I put in offer about two weeks ago and now we are in same page on sales price after going back and forth several times.

Here is the deal. I wanted to post this before I put in an offer but some reason I could not post it here until today.

It is a townhome nearby one of major universities here. It is listed for $60,000 and on the market for 130+ days. It is two bedrooms and two baths and currently rented for $725.00. New tenants just singed one year lease in October 1st 2013.

Condition – it is clean and no repair needed (I think) but I think some update will increase rent to $775 to 800.

I was shooting for about 10% ROI. I know there are some area here that you can make much more than that but I rather have a place that I know it will not depreciate much and at least it will hold a value when I want to sell it in 10 or 20 years from now and have better tenants.

Anyway, I originally offered him at $37,500(ROI @10.56%) but we have agreed on price at $42500 with no contingency except the inspection contingency but he wants all of November rent( I plan to close on or before November 15, 2013) and he doesn't want to give me back security deposit ($600). I am okay with not getting any November rent but I don't know about the deposit. I don't want to lose this property over $600. Then again, I think this is just an okay deal from what I have seen here in this forum.

Any input would be appreciated. Thank you.

725	Rent
108.75	Mgnt fee
86	Tax
72.5	Reserve for Repair & Maint.
60	Ins - Quoted from state farm
58	Vacancy reserve
385.25	Total expense
339.75	Net income/ Month
4077	Net income/ Year
43,775.00	Purchase price including closing cost
9.31%
42500	Purchase price
3.00%	Estimated closing cost
1,275.00