Quote from @Greg M.:
Doesn't sound like a bad deal. Your vacancy cost sounds to be low, but remember the tenant can leave at any time. I'd make sure $1500 is market rent and if the unit becomes vacant, what is the typical turnaround time.
Since it is a townhome, I'm going to assume that there is an HOA. If so, most major repairs are going to be covered by your dues. Therefore your CapEx is likely going to be low. However, this also depends on the unit. Is it remodeled or outdated?
Basically you put $50K down and year 1 get $2000 back as principal reduction and $1800 as cash in pocket, for a return of 7.6%. Is the area appreciating in value? Are rents increasing? If so, those are a major boost to your return.
I don't know your area, but 5.5% interest on an investment property with 25% down seems a little high. Have you shopped around? I'd assume you could do better than that, possibly 5% with 20% down without much problem, which would dramatically change the numbers for this deal.
Thank you for the wonderful feedback. I included P+I, taxes, insurance, and HOA totaling $1350. This is a nicer unit built in 2004. See pic for ALL rentals even available in the area, maybe 5-7 at a given time in a city of 35000. She did agree to sign a 1 year lease.
I am choosing to put the 25% down.
