I paid over asking, I feel dirty lol

[Mel Park]

I've had (2) rentals in Northern Virgnia for years and have been looking to add.  Anyways, I just bought my first townhome in Metro Atlanta (Acworth).   I paid $7,500 over asking price.   

NET of *all* expenses, management fee, maintenance, future maintenance - I think it's a realistic 3.5% yearly return and it seems like there is not a shortage of tenants, and rents have indeed risen.

3.5% is certainly not my goal in life....but I figured this is better than 1.5% that cash earns in low-risk accounts, so why not 3.5% in a low risk house. Of course, 3.5% ROI factors in zero appreciation and over the next 5-7 years, I'm hoping for a yearly appreciation of 4% and I hope that's realistic. My numbers, based on a 2 year tenant

$257,000 price WITH all closing costs.

$1,750 monthly  rent (Local PPM feels $1800 is a done deal based on comps)

$21,000 gross rent

-$2,100 PPM fee

-$2,300 taxes

-$1,700 HOA fee (landscaping, roof, siding they take care of)

-$900  yearly repairs (call the plumber, the heating guy, etc)

-$1,100 yearly accrual (eventual paint, carpet, new appliances)

-$400 CPA (I use $400 against each rental)

-$1,600 insurance

-$200 stuff I'm not expecting

-$1,750   (1 month vacancy, every 2 years, plus marketing costs)

$8,950 net profit / $257,000 = 3.48% ROI with no appreciation.

Yes, one can buy a share of Coke to make 3%, or a share of Chevron to make 5% but like all investments, things go up and down.  Furthermore, in a time of potential inflation and devaluing of money - I want part of my nest egg in solid bricks (or siding, in this case:).  Also due to depreciation my real estate companies legally on paper make zero profit......and that means that unto $78,000 in stock dividend income is tax-free.  It also means I can keep my income bracket low, and qualify for health insurance subsidies. 

I'd be elated with 4% appreciation.  It's hard for me to imagine my $250k townhome, being worth $300k one day but then I look at my average townhome in Northern Virginia - just 5 years ago it was $240k, and today it is easily $310k so who knows, that could happen again.

Questions, comments, insults, critique - all greatly appreciated