Looks like a good buy/hold, but....

[Pearce G.]

I've got a turnkey buy-hold opportunity.  Just rehabbed by an experienced owner-builder. Looks to be low-maintenance and the seller just signed a 12-month lease with a new tenant.  Great, huh.

Unfortunately, the seller rented it below market...at about 0.9%.  And it's in a tight market, so I don't expect a lot of negotiating leverage.

Questions:

1.  Buy-hold is a long-term strategy.  Would you buy a buy-hold knowing it will not cash flow the first year?

2.  Even if she proves to be a great tenant, I will need to raise the rent 10% after the first year and maybe again after the second year.  How much lead time would you give a good tenant when you know you have to raise the rent by that much?