Early investing journey - considering breakeven SFH 2 in same community as SFH 1

[Patrick Wilson]

Hello! First time poster but been devouring bigger pockets content for the last year. A while back, I bought my first property - a single family home from a FSBO outside my hometown in Northern MI (a fairly happening summer vaca destination). SFH1 - new 350k spacious 2/2.5 in a small community walkable to a cute country town near a lake. After owner occupying, ran the next 9 months offseason as a rental on slightly better than breakeven cashflow (comfortably could cover the mortgage + 100/month towards principal + 150/month). The big learning was that there was plenty of headroom on the rental price, and I have reason to believe I could raise the rent up to 500/month and still be able to fill for a quality tenant this next time around.

The community where the house was bought: 10 lots, similar style homes built on 7/10 of them rn by the same builder - min lease length 3months by the community guidelines (no HoA dues but there is some structure that governs the street). I also bought a ready to develop lot next door along the way for 35k as they were getting snatched and I felt it was undervalued for the area. I believe this community is a hidden gem

Cool, great first year experience with home ownership. Not wildly lucrative cashflow but it totally fits my broader goals, could play a part in my life as an occupant at various points, being close to my folks etc. Now in year two, I am looking for the next step. Opportunity comes up, the builder is just about to finish a small home in one of the lots in the same community - SFH2 - a smaller 2/2 but brand new, nice interior touches etc. Price has been creeping up with building supplies but I have chance to buy at 300k before it goes to the open market. My SFH1 purchase very likely was a true discount, whereas this is probably more accurately priced for the market - My analysis tells me that with current rates / I could owner occupy and run a similar playbook afterwards with this SFH2, but would be much closer to breakeven cashflow or possibly slightly negative in the early days. My question to you all, is would you buy SFH2? 

Why I like the deal:

- I have some sort of playbook for how to run a rental in this community, I have contacts, I have eyes on things with the neighbors, I understand the community already. I see this almost as an expansion of the same home, where potentially softens the rate of return slightly but increases my stake in the whole community

- I am able to manage both of these very passively without needing to surrender a cut rn 

- I am very early days in my realestate investment journey and am interested in building a more diverse portfolio with a stable core (these SFHs stand to be a more stable, newer centerpiece that I could experiment with more lucrative high risk STR or rehab projects in the future)

- I know the quality is very high, and I think with current demands, these properties fit nicely at the top end of the market - there seems to be a number of explored options yet, for finding quality tenants willing to pay better prices 

Why I don't like the deal:

- It is almost definitely a worse deal that SFH1, doesn't feel good to be going in that direction on my second deal. 

- Doesnt feel like I am getting much of a discount at all on purchase

- With these homes in a site-condo arrangement, future potential for STR/upside could be nonexistent, neighbors could start to make a big fuss and I would have to handle it

I feel fairly isolated so far on this journey thus far, with only my partner to bounce ideas off of - so bringing this to you all. What would you do? We are aware and interested in all the magic of a house hack / multi family / STR investment / rehabbing etc. But this feels like a chance to take another small step forward on a lifelong journey, even if not a very clear path to cashflow in the very early days.

Would you take the deal for SFH2?

Anything you could consider changing/critiquing about my approach thus far?