Buy or Not Buy to Rent to a Friend?

[Yewande Omoteso]

Hi,

A friend of mine who has no credit, but is otherwise very responsible, has requested me to buy a house for her family so she can rent from me.  I have no concerns about her integrity and ability to pay, I am concerned though about the financials and wonder if I should move forward.  

I am in a contract for a $270,000 house in the part of town she wants to be. The 30 year mortgage and taxes is $1,800 (I am putting down 5%).  Apart from the mortgage, I would need to pay the homeowners insurance ($2,000) and homeowner's association fee ($500).  I will also incur closing fees of $10,000 and down payment of $13,500. The most she can pay for rent is $1,800.  That takes care of the mortgage and taxes, but does not take care of my initial investment of $23,000 and the other expenses I have outlined above in addition to maintenance and repairs that might come up.  I will be losing money on a monthly basis from the deal.  On the flip side, someone else is paying the bulk of the mortgage and I am building equity.

I am very confused on how to proceed here.  I have three more days when I can exit the contract with no penalty.  Any advise will be sincerely appreciated. Thank you!