Buy this condo to rent out?

[David Cole]

Hello!  I live in northern Virginia, just outside of Washington D.C.  I rent out a condo and am considering buying a 2nd condo in the same condo community to rent out.  Here are the details:

-1 bedroom 600 sq. ft. condo near the Potomac River.  New hardwood floors, new kitchen (floors, cabinets, counters, appliances including dishwasher), new windows, new HVAC, new paint, new lights/fixtures.  In other words, I would anticipate little maintanance.  It looks very very nice compared to most condos in the community & should rent easily.                                                                                                              

-Purchase price will be ~$200,000.                                                                                                                                                         

-Gross annual income at least $16,800, (but perhaps as much as $18,000).

-Annual condo association dues $3,360

-Annual property taxes $1,900

-Annual hazard insurance (in addtion to the condo master policy paid through the condo dues)  $250

-Anticipated average annual maintenance $500

Given this info., I calculate the cap rate to be around 5.5%.  The average cap rate for such property in this area is 4.5-5%  (plenty of jobs, very well educated workforce, high demand for housing, etc.)

I don't have $200,000, but do have $40,000 invested in stock index funds that I can sell to make a 20% down payment.  I have been approved for a 30 year fixed mortgage @ 4.625% (investment property rate) with the 20% down.  Here's how the monthly payments would break down:

P&I: $822

condo assoc. fee: $280

Property tax: $158

Hazard insurance: $20

Total: $1,280

Since it would rent for ~$1,400 - $1,500 per month, I realize that there is basically no cash flow.  But I am not interested in buying additional rental properties.  Instead, the idea would be to diversify my net worth... currently 80% of my net worth is in stocks & bonds.

Given the situation, does this look like a good deal?