Help with Deal Analysis!!!!!

[Andre Smith]

I am looking to add 2 properties to my infant portfolio. I have seen about 13 properties that I "think" are good deals. I've narrowed in on 6 of them. I'll give a brief summary of each pair. Keep in mind I will be buying cash.

The first 2 properties are located in a news development. Continued steady growth. A little slower than another area I am looking. Both are 3 bed 2 bath single family split level homes, 2 car garage. Both are built after 2004 so fairly new yet. Ones a HUD home that has a moderate drive way issue. The other is around the corner and is a great house. Listed from 120K to 130K. Comps support listings up to 135K. Taxes are about $3000.

The next 2 properties are both walk up town homes. 2 bed 2 bath, 2 car garage. just under 1110 sqft. Both built between 2007-2009. really clean and well taken care of. These are located in a hot area, top schools, booming growth all around this area. I mean its a hot area. HOA fees are a little strange. one is $105 and the other is $170 a month. Both are listed under $111K. taxes are around $2300

The final option are a little unique. Properties are owned by an aging investor looking to move a dozen properties in and around my area. All are currently rented and some have long term leases. 2-3 years. All rents are a little low but still bring $1100-$1200 a month. all  are Similar priced homes. Ranging from 125K to 150K. Oldest home is 1963. These are mostly in well established areas that more of a rental area with less owner occupants as the first 2 deals. Newest home is 2009. all are 3 bed 2 bath, 2 car garage split levels.

I am immediately drawn to the town homes in the hot area that is growing fast. HOA fees and the potential for those to rise are a little concerning. only being 2 bedrooms are a small negative. I like the low price tags, Under 111K with rents in the range of $1000-$1150. Am I missing some big thing that makes town homes a bad deal?? Or are the single family homes the way to go,and if so should i look to take over the properties that are already rented out or start my own process from vacant? Or is there something completely different I should be looking to do with a couple hundred K??? Any and all advice is welcomed, I'm thicker skinned. Thank you in advance for your input!!!!

[Leon D.]

@Andre Smith my first reaction would be to forget about the townhomes: the units themselves are too small, and there's the HOA to consider, which can (and will!) raise dues on you in addition to whatever by-law nonsense the board will see fit to impose.

Regarding the the first two: drop the HUD property. No need to deal with the HUD inspections if you can help it, and why buy a place that has a driveway (or any other known) problem? Since they're both good size, consider the "around the corner" place, though.

The last pair could be the way to go: old investor, looking to unload, means potentially good prices. Also, you'd have tenants in place, a bonus you shouldn't underestimate. The long leases are a mixed bag, since you don't have to find people for a while, but you have to eat the below market rent for longer than the standard year (you could get some of that back with the right purchase price though).

So, my two cents: the better of pair one, ignore all of two, take a good look at three.

Good luck.