Just did my first "different" deal - long term vs short term return

[Jeremy H.]

I just did my first "different" type deal - my usual deals are cashflow heavy in the best areas I can get them. Typical houses in the suburb type area, then for MFH I have a duplex near college campus, a fourplex in a good geographic location (but somewhat ghetto immediate neighborhood). Generally require a small rehab and they are good to go. Point being they all cashflow really well especially the MFHs. 

I'm under contract on a house that is 4 bedroom/3 full bathroom, about 90 years old and 2 blocks from the local university. Wholesaler is asking 180k, comps have it right at 230k. It definitely needs some TLC but the Cap Ex items are in good condition - double paned windows, new roof, new electrical box, new exterior doors and lots of new wiring. Needs to replace some rotted wood/paint/trim, some carpet flooring etc. Mostly small stuff - I think it gets to be in nice rental condition for 10k. So all in 190k.

Rental estimate has ranged a lot depending on who you talk to - previously rented for 1750. I ran numbers at 1500. If the lease was up during june/july I think we do 1700 since we have 4 bedrooms. But for now I'm rolling with 1500. 

I keep asking myself what makes this deal worthwhile since it won't cashflow hundreds of dollars a month...(1) the area is fantastic, walking distance to everything (2) the area is undergoing a lot of new construction and revitalization (flipping, tearing down and doing new builds) (3) 2 blocks from the local university (that place isn't going anywhere) (4) plenty of parking for probably 6 cars (5) option to turn it into an airbnb or duplex (6) a good amount of built in equity - all in for ~85% of the ARV (7) on top of the small cashflow we can take tax deductions, have small loan paydown, and I believe the area will appreciate great (even in a downturn, simply because demand increases due to the population growing in that area and there is not room to build anything more in the area)

For financing I plan to just put the 20% down, maybe 25% since I would prefer slightly more cashflow buffer, and can take a HELOC later if I need access to that money. Rate I was quoted at was 7.3%. I think we see this drop at least a point in the next 5 years and can refi then to improve cashflow. I know putting in more money doesn't "make sense" from a return perspective.

I guess what makes it feel weird is this one is a more long-term strategy. The others I have cashflow day one great. This one will cashflow about $250/month after PITI (at 1500/mo rental). Hardly a good return to have 45k in the property. But to me it's still a "good deal" due to the built in equity and location. So while it's costing me say 45-50k (between the 36k down and 10k rehab) and it nets <3k a year - I'm also getting 30k in equity in a great location. (P.S. this is all worse case scenario stuff - I make it nearly impossible on myself to get deals lol).

I guess what are your thoughts on investing like this? Taking lower cashflow in exchange for equity and an awesome location? It feels weird on paper but makes sense with a lot of intangible things