Looking for feedback on my first potential investment!

[Rhianna Raslan]

Hello. I am currently searching for my first investment property in Charlottesville, Virginia. I chose this area because I am very familiar with it and the rental market is good due to UVA/UVA hospital. I also have a few connections there with realtors and contractors. My goal is to buy my first rental property by the end of this year and then buy another by April 2017. 

I am currently torn between buying something I can pay off in cash or using a lender for a more expensive property. My thought process is that I would benefit from buying something within my pay off range for my first deal and then using a lender for my second.

Here is the information and the numbers for the place I am interested in:

Purchase Price: $46,000

(Market Value about $55,000)

HOA fees $265 monthly

Personal Property Tax: $544 annually or $46 monthly 

Insurance: $50 monthly

Rent Potential: $800-850 (I'm sticking with 800 for my calculations to be on the safe side)

If I obtain $800 a month for rent and take out expenses  (tax, hoa, insur) that leaves me with $439 a month cashflow. I rounded down to $400 because I don't want to overestimate. At that rate it will take me 9.5 years to get back my original investment.

This property is a foreclosure so my negotiating room might be limited. I was planning to offer $35,000 - $37,000 in hopes of getting it for about 40. 

1 bedroom 1 bathroom 512 sq ft

This is a non-warrantable property because the complex owns a majority if the units.

I spoke with the complex manager and their identical units are not rennovated, (nor is this one) and are renting for $850.

It's in an apartment complex with a fitness center, laundry facilities, pool and clubhouse.

What do you think of this investment? What is your advice on buying for cash at first versus using a lender? Any and all advice is greatly appreciated! Thank you in advance!

[Rhianna Raslan]

Kelly,

Thank you so much for the advice. I was not aware of the higher vacancy rates as the complex manager said they have no problem renting them out. With the "1st month free" deal that makes perfect sense to me now. I will ask them for a vacancy number but with the promotions they are running I'm aware I can't rely on that indicator.

I am also looking at a duplex a few blocks from UVA in a better area. I was just unsure about the loan for my first property. 

I'm curious, what are your favorite areas to buy in Charlottesville?

Again, thank you for your time and expertise. Your advice was very helpful!