Thoughts on this deal?

[Alicia Kennedy]

This would be my first investment property. I was able to locate a 3 bedroom 2.5 bath townhome for sale via owner finance. 

Price 155k

Down payment 10k plus 2k closing

Rate 8% Balance due in 5 years as a balloon

Payment is 1130 per mth does not include taxes or insurance.

My intent is to buy and hold for a rental. TOTAL MONTHLY costs =1300 

The maximum rental is about $1250-1325 for this property size since it's in a historic part of town but this is relatively new construction (2007) in a sought after area. The unit is turn key and needs no work to be move in ready.

Purchasing initially would not meet the cash flow numbers but I would hopefully be able to refinance rather quickly although I am concerned about those costs coming back to back. With a refi it would cash flow close to 500$ per month provided it would appraise properly. My credit is fairly decent, high 600's but DTI is close to 48% before this deal.

There are only 3 units and this owner sold the first one in June for the same price/terms.

Any thoughts on this deal?

[Charlie Fitzgerald]

This is not the deal for you as your first one,  unless you have the financial means to cover all shortfalls (and there will be many) out of you're  pocket.   You can count on maintenace issues in the next 5 years,  vacancies, etc.  You are starting off in a negative cash flow position,  and spending $12,000 to buy into an investment you have no experience with yet.  You are taking more than a couple of risks here. ..tbe biggest is not being able to refinance this outdoor took the balloon coming due.  My advice would be to pass on this one.