Best way to invest $200,000 in Northern Utah?

[William Govans]

I'll try to not make this post too long! Sometimes it is a tough balance getting enough info out and not blabbing on. Hang in there with me please!

A family member of mine unfortunately and unexpectedly passed away. To my surprise I found out $250,000 was left to me. I am 25 years old, married, hold a college degree with a steady job earning $60,000. My wife is also employed part time and brings home an additional $15,000. Other than the home we currently live in we have no debt. The house has about $25,000 equity in it and $110,000 left on the loan.

Our current idea is to purchase 2 town homes, all cash, and rent them out. The units are in the same town but about 5 minutes apart and appeal to slightly different markets. Both units were built within the last 10 years. I've spoke with quite a few realtors and am familiar with the area and don't foresee any issues renting them out to good tenants and maintaining good occupancy.

After running the numbers the CAP rate would be 6% for each property assuming we pay full asking price, closing costs, etc. Looking at comps we shouldn't have to pay full asking price and the CAP rate is closer to 7.5%.

I plan to work full time at my job I currently have and my wife could keep working part-time until our next child is due this winter. I'll manage the properties myself to start, if it gets too much to handle I can hire a property management company in the area, but I don't think it should be too much to manage them with as close as they are to us and the condition they are in.

Is this a stupid approach? I know it is ridiculously conservative, but I don't see me realistically flipping homes or managing multi-family complexes. If all goes well after 5 years we could take equity loans for the 2 town homes and our home and get really serious if needs be.