Considering My First Rental Property

[Austin Works]

I live in an area where townhouses are very popular. However, I have come across an opportunity to buy a townhouse for $74,000 that appraises for $115,000 & rents for $900 monthly. I currently own zero rental properties, but thsi seems like it would cash flow on a 20 year conventional mortgage. There are no repairs needed, as the property is in good condition. There are no HOA fees, and the tenant pays all utilities. Is this something you would pursue? Why or why not? Thanks, I appreciate any feedback!

[Suzette Murray]

Hi @Austin Works,

In order to know if this is a good deal...get a mortgage rate quote from your lender... know what your exact mortgage payment will be with the 20 year conventional loan. If this is an investment property the rates will be higher than a traditional owner occupied property, so 1st off know what your rate/payments will be depending on what you put down.

Secondly, figure out the taxes, insurance, maintenance costs and factor in for vacancy. Add in property management fees, unless you plan on tackling that yourself; however, would still factor it in, as you may change your mind down the road and want to have enough left after paying a PM to cash flow. Most lenders will calculate income from an investment property at 70% or 75%. If you happen to be able to rent 100% of the year, then great, but try to figure worse case scenario. It's super that this unit does not have any HOA!

Add up all these costs in order to figure if you will truly cash flow with $900.00 a month. This will also help you determine if the ROI is inline with what you desire.

Hope this helps. Good luck to you!

~Suzette