My first rental property

[Amar Mistry]

Hello everyone,
I am going to invest in my first rental property. I presently live in NJ and looking into Tampa, Wesley Chapel, Plant City for properties in low to mid 300s. I started my search a while ago looking for condos in mid 200s, but eventually decided to go for a single family/town home/villas and the new construction instead. The main reason is I would not have to worry about repairs etc. 

I can bring in about 100k down. The town home is priced at $299,900 with 5K towards closing if  go with the builder's finance. With the current mortgage rate of 6.5%,  my total out of pocket would be close to $2100 for a town home  (3BR/2 Bath/1 car garage, $299,900) of 1600-1700 sq feet. The rent for the similar home is around $2150. Having said that, I have a few rookie questions:

1. Looks like I will not have any cash flow. I know its not an ideal scenario. I have a fundamental question on cash flow. What is the real way to calculate cash flow? If I put 150k down, I could get positve cash flow, and if I put 75K down, I'd have negative cash flow. so technically, isn't putting more down to see some money in my pocket counter-intuitive?

2. There is a lot of prediction of market crashing in the coming months. This could be due to fed increasing rates. This means the home price might drive down, and mortgage rates would go up. Isn't it wiser to go for the lower cost to buy and higher rate since the rates could come down in the future allowing me to refi, where as the cost of the home will stays the same for me  even if there is correction?

3. This last question is for anyone in Tampa market: Trying to decide if I should go for a developing town like Plant City (Close to Tampa, Lakeland, and an hour away from Orlando/Disney) and get the single family for the lower price than the same builder offering same homes in Wesley chapel for much higher price. If I go with Wesley Chapel, I might need to go for town home.

Any insight, tips, or suggestions would be really really helpful.

Thank you all,
Amar

[Dean Smith]

1. I would not put in more money, especially if your goal is to scale. I would be looking for better deals instead of trying to make this one fit. That being said there are a lot of benefits to owning real estate besides cash flow; depreciation, appreciation, tax write-offs, also consider that rent goes up (typically) and paying down the loan. 

2. Refinancing, especially a rental property, is not usually that easy. Keep in mind that most lenders will want to see 70-75% LTV. If prices do come down you may be stuck for awhile until they recover.

3. Depends on what you want. Might get better cash flow in Plant City, Brandon, Riverview but better appreciation in Tampa. I like to work backwards and do rent comps first to find high rent rates then look to see if there are any nearby properties for sale that I like. Also consider short term rentals for higher returns.