My First Deal - What would you do?

[Ali Croft]

Hi all. I've been reading your posts for awhile now, so first thanks for being so open and willing to share your knowledge and advice!

I am looking for my first deal, purchasing a duplex to owner-occupy in Richmond, VA. I lived there in the past so I know the neighborhoods fairly well. An agent just found me two off-market deals, both of which I like, but am torn between.

FYI - I currently own 0 properties, and I have about $90,000 in cash to play with (6-month emergency fund already taken care of outside of that.) I'm very new to the investor game, so my goal with the first purchase is:

• A place that my partner and I would want to live in for 1-3+ years
• Cap Rate of 3-4% minimum
• Cash flow as close to $100/a door as possible
• Have cash leftover to (A) start the slush fund for this property, ~$5-10k and (B) less vital: start building the pot for Property #2 within the next 2 years 
  
• Note: I am semi risk-averse, not looking to over leverage right out the gate

I'm looking for this first purchase to be a base hit, not a home run, as @Brandon Turner says.

Property 1:

• Duplex
• Purchase Price $275,000
• Rental Income: $1000/unit
• Location: North Side of town (Northern Barton Heights), up and coming. Maybe a Class C moving into a B. But this property is close to a commercial corridor, so not *ideal*. There is a Burger King, McDonalds, and a motel nearby. But-- SFH are going for $350,000 on the block.
• Fairly turnkey but not looking super modern/stylish currently

Property 2:

• Duplex
• Purchase Price $380,000
• Rental Income: $1400/unit
• Location: East End (Chimborazo), maybe a Class B moving into A. Beautiful neighborhood, we love living in this area.
  Renovation currently being done to upgrade to modern styling, it looks great so far.
  Definitely turnkey
  

For both, I looking of doing a 30-year fixed conventional, 15% down.

Property 1 feels more "responsible" in that it will leave more cash in our pockets right now -- but, the neighborhood is less desirable and the commercial corridor likely won't be improving for awhile. Property 2 feels less responsible in that it's more expensive -- but it is more secure neighborhood-wise, both short- and long-term.

What would you do?

[Ali Croft]

@Tom Hacku, @Darius Ogloza Thank you so much for your thoughtful responses! You both had me challenging my own biases and assumptions about these options.

After reviewing the numbers some more, and considering our own finances and the current economic climate, we decided to proceed with the "cheaper" deal, Property 1. We are both happy and comfortable living in the neighborhood so while it wasn't our top choice it's still not a huge sacrifice! 

We also discovered there is likely to be re-development in the commercial corridor that I've been worried about, so that assuaged those concerns quite a bit. Info on that if any other locals are interested: 
"On July 22nd, 2019 City Council passed the ordinance to amend the zoning map to rezone the first phase of implementing the VUU/Chamberlayne Neighborhood Plan: rezoning parcels along sections Lombardy Street and Chamberlayne Avenue, as well as Overbrook and Graham Roads in order to create the neighborhood center envisioned by the plan. A summary of the rezoning can be found here. Materials related to Ordinance 2019-174, which remapped those parcels can be found here."
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