Your thoughts on buying a townhouse in Greenville, SC

[Harika Tumula]

Hello everyone, I'm new here.

I need your inputs and advice on a deal. Also, I'm looking for a lender, property manager and realtor in Greenville SC.

So I'm interested in buying a townhouse in Greenville SC. House is brand new and will be ready by dec 2024. It costs around

260k. I want to buy and rent it @1700/month. Is it a good investment? What do you think?

Appreciate your time.

[Bryan Maddex]

Hello @Harika Tumula!

I am a mortgage broker and work with over 220 lenders. I am also an investor. I am also a vendor member of the CREIA based in Greenville which is one of the best REIAs that I have been to!

Yes, you can rely on appreciation and rent increases if you do not need the cashflow now. Also, remember that around 11-13% of your payment goes towards principle each month. (This is Amortization). Think about that, that means part of your payment goes out of your left pocket and into your right pocket. You get that money back when you sell. So, your cash flow may be closer to even long term, even if you are losing short term.  This does not consider maintenance. Once you factor that in, your small loss is actually a bigger loss once you need to do any repairs or upkeep. 

I am a fan, don't get me wrong. the smaller your mortgage, the less likely you are to refi because rates got lower. The larger the mortgage, the more likely you are to refi. But, rates are likely to go down 1.5% to 2.5% from where they sit now based on current projections. You can make the payment lower later possibly. 

If you have a small mortgage (under $200k) i would suggest you pay for your next refi at the time of purchase!  Pay 2 points. These first two points usually break even faster than when you buy your rate down more than 2 points. Now you get better cash flow, probably got a tax deduction due to the points (check with your CPA), and you don't need to worry about refinancing later. Best yet, get the seller to pay a couple points towards closing costs when you make your offers, even if you have to go up on the purchase price (still has to appraise at the higher price). If appraisal is done on this one, and it came in over list price, ask the agents to update your contract to get up to 2% of the sales price towards closing costs without changing agent commissions. Same net to the seller, but keeps precious cash in your bank account!

Townhomes have extra holding costs in HOA and could limit your renting ability. I generally advise against townhomes and condos as the HOAs can become harsh and limit your options. But, if you think you are in a greatly appreciating area, and the cashflow works for you, not saying not to jump on this!

Last, if no one told you, taxes are about triple the cost of owner occupied properties in SC. Call your closing attorney and get them to run numbers for you on projected non owner occupied taxes. 

If you want to talk thru this, let me know!