First Rental Investment

[Nal Bel]

Hi!!

I'm considering purchasing a commercial property as my first rental. I am debating whether to pay cash for it or to get a loan as most things I have read here encourage getting a mortgage to maximize returns. So here are the details:

Asking price: $115,000

Rent: $825/mo

Taxes: $116/mo

Renter is responsible for all other fees including repairs, insurance, etc...

Cash Flow (if no mortgage): $709/mo

ROI: 7.4%

This seems low as with most posts I read about on BP, the ROI is anywhere between 18-30%. The property is not located in the US reason why renter is responsible for all fees by law. It is located in an established neighborhood in a big city. The property has been rented to the same company for two years (ever since it was built) and the renter has invested a lot of money into it and doesn't plan on leaving anytime soon. The rent will increase by 10% every three years to account for inflation. I still need to find out if the rent terms are subject to change with a new property owner but this is the current contract. The price of the property will probably continue to appreciate as real estate has been in very high demand in the city regardless of how the economy is doing. Is it a good idea to invest in this property? If so, then should I pay all cash or pay 30% and get a loan for the rest?

Thanks!!

[Arlan Potter]

1. Who said that getting a mortgage will maximize profits.

2. Buy close to home. Something you can go look at.

3. This deal looks like a scam.