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Updated over 8 years ago,
Can someone give me a gut check?
I live in the North Aurora market near Denver, which has been really, really hot over the past few years. With that said, I have been shopping this year to try and buy another rental property. The MLS has been pretty tight, but occasionally yields some interesting deals. Based on for-sale signs in the neighborhood, and the fact that in my area people have been having trouble raising rents beyond their current values (they can't find people that income qualify!), it seems to me like the market might cool slightly.
Today I stumbled across this deal, and am considering throwing in an offer. What makes it interesting is that instead of being a simple SFH, it has a carriage house in back that functionally makes the property a duplex. Main house is a 1500sf 3bed (1 non-conforming), 1.5 bath with a detached one car garage... C neighborhood, not great schools. Carriage house is about 800sf, call it a 1bed/1bath. Separate electrical, same water. Rent for the main house is likely $1400/mo, carriage house is currently rented for $725/mo. Just about everything is up to snuff, so it needs little to no repairs. Ask on it is $285k.
Going through the rounds, the cash on cash return makes sense with a lower offer and 75% financing, although I wouldn't consider it to be a huge score. Up until now I have mostly bought distressed properties that I can put a lot of sweat equity into and BRRRR. It makes me a bit nervous to tie up so much of my capital (I do not have a huge portfolio) to pay 25% down, and doing a BRRRR is out of the question on this one. No possibility of owner financing, they need to get their money back out - but they are motivated because they have had a bad experience (and put waaayyyy too much money into it).
So here is my question. Early in an investing career, is it wise to stretch a bit and buy a rental that cash-flows decently well (15% cash on cash)... heading into the winter in a year where the market might cool, but rental rates will likely stay fairly steady?