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Updated almost 8 years ago on . Most recent reply
Buying a house that cashflows that will not appreciate
Long story short I have an opportunity to purchase a 2bd 1 bth non-listed home straight from the seller (financing already lined up) that is fundamentally sound. New roof, new AC, relatively new furnace and house has current tenant that wants to re-sign.
The house is in a decent area (call it class B $80-100K) very close to the really nice areas however it is on a busy street where houses tend to sit on the market for a long time and historically do not appreciate. I have looked at the historicals for many of the houses on the same street and they are selling for the same price that they were bought for 10-15 years ago and show little fluctuation in between. This house is in Kansas City, MO an area that is experiencing phenomenal growth and increases in property values.
The house has a 7% CAP and has no problem getting rented and receives quality tenants. I have received all the records for the house and copies of past leases, the house has never sat vacant for longer than a week in between tenants.
So, the magic question. Is it still a 'good' investment knowing that it is very unlikely that the house will ever appreciate? I never bank on appreciation or factor it into any calculations, but I think we all agree that it is a very nice added bonus when our property has a chance to appreciate at the very least with the market trend. The owner has owned the house for 12 years (rental for 7) and is selling to me at less than he bought it for, slightly lower than loan current loan amount.
My strategy is buy and hold. Some might be asking why I am worried about resale, but I think there are many obvious reasons as to why it is still an important trait regardless of strategy.
Any thoughts or comments would be appreciated, I always enjoy other people's perspectives.