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Updated over 1 year ago on . Most recent reply
First Investment Property
Hello everyone!
I'm looking into buying my first rental property. I am stuck on choosing between two townhomes. I have a little over $50000 budgeted for a down payment.
The first one will be built by January 2024 and is $255,000 3br/2ba and 1 car garage. The HOA is $200 but it has no pool. It is being built near a shipping distribution center that is also under construction. This property is about 15 minutes from the beach. The school district is very good. The builder also offered $8500 for closing costs if I finance through them. All appliances would be included with a warranty for 10 years. Everything else in the property would be under warranty for two years. My agent said this property would rent for around $2000-$2200.
The second property is @225,000 built in 2007 and is a 2br/2ba. The price is a little negotiable. The HOA is $300 and it has a pool. It is near shopping centers and is about 15 minutes from the beach as well. The school district for this property is decent. All of the appliances are original including the hvac system. Agent said this would rent for $1700-1800.
All exterior maintenance is included with the HOA with both properties. Both are 15 minutes from the airport. Neither property comes furnished.
Which would be better for a first investment? I'm leaning towards the first on but it does not have a pool and in the Southeast, I feel like a pool would be better even though it's only 15 minutes from the beach. Also I may need a property manager since I live in NY.
Thanks for any help you can provide!
Also this is my first post and if this isn't posted in the right place, let me know!
Most Popular Reply
Quote from @Tim Kane:
Quote from @Peter Dorinsky:
Quote from @Tim Kane:
Hello everyone!
I'm looking into buying my first rental property. I am stuck on choosing between two townhomes. I have a little over $50000 budgeted for a down payment.
The first one will be built by January 2024 and is $255,000 3br/2ba and 1 car garage. The HOA is $200 but it has no pool. It is being built near a shipping distribution center that is also under construction. This property is about 15 minutes from the beach. The school district is very good. The builder also offered $8500 for closing costs if I finance through them. All appliances would be included with a warranty for 10 years. Everything else in the property would be under warranty for two years. My agent said this property would rent for around $2000-$2200.
The second property is @225,000 built in 2007 and is a 2br/2ba. The price is a little negotiable. The HOA is $300 and it has a pool. It is near shopping centers and is about 15 minutes from the beach as well. The school district for this property is decent. All of the appliances are original including the hvac system. Agent said this would rent for $1700-1800.
All exterior maintenance is included with the HOA with both properties. Both are 15 minutes from the airport. Neither property comes furnished.
Which would be better for a first investment? I'm leaning towards the first on but it does not have a pool and in the Southeast, I feel like a pool would be better even though it's only 15 minutes from the beach. Also I may need a property manager since I live in NY.
Thanks for any help you can provide!
Also this is my first post and if this isn't posted in the right place, let me know!
Hey Tim, I would also suggest first calculating your expenses (PITI + HOA). HOA fees can also make it more difficult to cash-flow on condos/townhomes doing long-term rentals. On the other hand, HOA's can be beneficial when it comes to maintenance and upkeep of the property. But as it stands now with the numbers you've provided, neither property is meeting the 1% rule. If you're set on getting a townhome and these are in a desirable location I would consider looking into doing a short-term or medium-term rental.
Depends on who you ask. This is an interesting BP article arguing that the 1% rule is dead:
https://www.biggerpockets.com/blog/1-percent-rule-dead
I personally still use it amongst other metrics, but it's not game over for me if a property doesn't meet the 1% rule. It also depends on your investment strategy. If you're trying to maximize cash-flow it may be a bigger factor for you.