Choice Between Two Properties

[Matt Leber]

I know some of you will probably tell me to offer on both properties, but....which one would you favor? I know numbers don’t usually lie, and they favor property 1 slightly. It’s just older and smaller and may be more maintenance. I’m likely going sec 8 either way.

Property 1:

$360/mo cash flow after vacancy, capex, misc repair reserves thru section 8. $35k invested capital at a purchase price of $90k (25% down plus closing costs plus minor repairs). B- neighborhood walking distance to high school. 3/1, but only 875 sq feet. Built in 1960 and may require some remodeling in the next 5 years. Remodeling likely inexpensive since it’s only 875 sq feet. Can get $1200 w sec 8. About 12% cash on cash.

Property 2:

$320/mo cash flow after vacancy, capex, misc repair reserves thru section 8. $42k invested capital at purchase price of $109k (25% down plus closing costs plus re-roof). C neighborhood but the property was remodeled in 2009 and is ready to go except the roof which we will replace. 3/1.5 1025 sq feet. Built in 2000 and will not need remodeling for some time. Can get $1250 w sec 8. About 9% cash on cash.

Which do you favor? They’re very similar numbers-wise.