My First Lease - Borderline Tenant - Would you have done the same

[Max Briggs]

I purchased my first rental property at the end of April. It was a 1400 sq ft property in Cleveland Heights,OH that I purchased for 60k, it needed cosmetic work but market rent in the area was about $1100-$1150 for a clean but not swanky SFR. I put roughly 13k into it removing wall paper, wood paneling, replacing a drop ceiling in the kitchen with a dry wall ceiling, refinishing hardwoods, adding lighting, and updating some plumbing.

$1100 in rent for a 60k property might sound great, but property taxes on the house are roughly $300/month, so its not as lucrative as it might sound, plus the 13k rehab out of pocket is more than my down payment so it cuts my ROI in half. But still I'm left with a $650 mortgage payment including property tax and insurance. After the rehab the place was looking pretty nice so I decided to ask for $1200 in rent and prepare myself to lower it if I didn't get any interest. I posted the house on Craigslist, Zillow rental manager, and a local listserv for medical residents and students. Over the next three weeks I probably showed the house to 20 potential tenants, some of whom were very enthusiastic, but I only received one application.

At this point my options were to accept the lone applicant or lower the asking price and try again. The applicants were two sisters each of whom had good job references. The older sister had a credit score of roughly 600 and the property management company at her prior residence said that they do not discuss tenants with other prospective landlords (Is that normal?).  The younger sister has no credit history or rental history due to her age. This was a pretty borderline accept reject case for me, so I requested a co-signer on the lease. Their mother has excellent credit and a solid job/income, so I accepted their application and signed the lease.

Now I have a property with a $650/month mortgage, and $1200/month rent with the potential to challenge the property taxes to reduce the mortgage payment to $550/month. This looks good to me on paper, but since this is my first time doing this I'm not exactly sure I made the right call.  What do you all think?