To invest or not to invest with current interest rates...

[Jordan Wisser]

Hey all! Looking for some advice/guidance on whether or not to pull the trigger on a prospective duplex. It’s in a great market & neighborhood. Pre-inspection, it appears to be a solid opportunity. Great property, perfect setup for a duplex with separate driveways, entrances, back patios w/ storage, brand new roof, plumbing, newer HVAC, appliances, flooring, etc. Basically a turnkey investment with all new interior upgrades that is poised to bring in solid rental income.

The downside right now is current interest rates. I’d be looking to purchase with a conventional loan, 25% down, at about 7.99% rate currently. The property should cashflow about $400/month before budgeting for vacancy/maintenance/capex. I’m thinking maybe I don’t need to worry so much about accounting for maintenance & capex in the first couple years since a lot of those big-ticket items are brand new/recently upgraded?

My hesitation is that after accounting for all of the items you are supposed to account for when analyzing a deal, the CoC return on the down payment is pretty much negligible initially. I would obviously plan on re-financing when the time is right, which would make the CoC returns look a whole lot better. On one hand, I feel that it is a great property and a great time to buy while competition is low. Once rates do fall, I think prices will definitely increase again as competition heats up with buyers re-entering the market. But on the other hand, I'm hesitant to invest in a deal where the margins are thin initially even if I do plan to re-finance. I've heard from some investors that are perfectly okay with simply breaking even on rental properties in the current market, but I've never had the risk tolerance for that.

Any thoughts/guidance/mentorship/advice would be greatly appreciated! Thanks BP community!