Newbie - Test my Math?

[Ryan Jones]

Let me just say - thank you in advance!

I've been looking at various places the past few months for rental property that would be a good long-term cash flow investment. I've found a place that I myself would enjoy living in which is a rule I'm using to judge the neighborhood and property. When I run the numbers it seems ~break even. Am I doing this right? Considering everything or missing something?

Additional info: Nice area, unique "condo" but standalone/no shared walls with a fenced yard near the green area and pool. Has been rented out for 6 straight years by a single tenant but they have moved out and the owner has decided to sell. Surrounding neighborhood homes (not condos) of same 3 bed/2 bath and size (1948 sqft) are in the 250-310k range.

Original list price: 239k; Current list price: 225k (110 days on market); Possible purchase price: 210k but let's use 220k for the numbers.

Purchase: 220k

20% conventional loan, down payment: $44k + closing costs = $48,400

Monthly principle & interest payment: $840

Property taxes: $250

HOA: $185 - covers all exterior, pool, and landscaping.

Insurance: $60

Total monthly expenses: $1,335

Estimated rent is $1,600 (maybe higher). A similar unit was listed in 2018 for $1,500/month and is off the market. I assume they got the $1,500 back then.

Cash flow of $265/month - assuming no vacancy and no other expenses.

Annual vacancy of 1 month = $128 / month

Leaving cash flow at $137 before any expenses. Or $1,644 / year ... 3.4% return.

That leaves only 8.5% flex room to $0 cash flow ($137 / $1,600 monthly rent = 8.5%)! Is that reasonable?

Also, as a newbie who owns my current home I know rents will go up but mortgages won't. How do you evaluate the long-term? Maybe it doesn't look so great in year 1 (see above) but what about year 4.. 5... 10...? Why don't investors talk more about that?

Thank you for your help and thoughts!