Should I Buy This Property (First Time Buyer)

[Eric Olsen]

After sitting on the sidelines trying to get into real estate investing for several years, I have the opportunity to purchase a 1 bed, 1.5 bath home in a desirable part of the California desert.

The purchase price is $299,000 with a 7.3% interest rate and 3% down. My plan would be to live in it for a year and then start renting it out. 

The property would rent long-term for $2,500 currently. As a short-term rental, it would make $4,000 a month during the "season" (five months in the winter) and about $2,500–$3,000 in the non-season (the rest of the year). 

During year 2, when I would be able to start renting, I would make about $500 per month in profit during the season and lose roughly the same outside of the season. However, this home is located in a market that has enjoyed significant appreciation over the last 20 years and has seen significant investment in recent years to provide strong additional appreciation potential in the future. 

With current projections, I could expect to start cash flowing every month, and not just during the season, in about 5 years, in addition to the appreciation the property is expected to gain. My plan is to hold the place long-term and use it to help gain a stable income during retirement. 

Do you think this is a good deal, or do you not recommend doing this?