Is buying in this city suicide? And other life choices.

[Aaron Bostelle]

The city in question is Reading Pennsylvania. 

I'm looking to buy my first owner occupant rental property. My experience is essentially nil so let me get you in on my thought process so you can critique it:

In no particular order....

1. Homes here are cheap but unless you can get them far below market value, you essentially will never get an increase in equity even after repairs. 

2. They are on the high side in cost of ownership because the homes are old and are typically in need of repair.

3. The schools here are absolutely godawful, so tenants would typically be single, starting out, or in a similar situation. 

4. Reading is a very poor city: part of the reason you can buy a townhome for under 15 grand. Also why there is high crime.

5. More I can't think of....

Essentially I have an opportunity to buy in this city without needing to finance. Theoretically I could buy a house at auction and do the necessary repairs to rent out some rooms. I wouldn't make this decision until I was nearly absolutely sure that I would make money on rents and equity, as well as a strong cash on cash return. 

I run a small online business out of where I currently live in the city. The other tenants are leaving the house, so I may have an opportunity to purchase the house. The price that my landlord has given me would essentially mean I would make zero money if I sold the place, probably even lose some in closing costs, but this house in particular is in a 'nicer' area for this city and has essentially all new utilities including the roof and windows.

I would dismiss this immediately if it weren't for the fact that I can run my business out of this home. Compared to what I pay in rent now, owning the house without any tenants would only be a few hundred more per month, and if I could even get one solid tenant it would massively offset the cost of ownership. 

The other option is to just continue to save money and wait for an opportunity in a better market, or a home/apartment building in this city that would actually be a great deal. 

I'm not sure if posting the actual address of the house is against the rules or whatever so I won't until I'm sure I can. 

[Michele B.]

You seem to want someone to talk you into this deal.  I will say this.  If it doesn't cash flow then its not a great investment.  Can you use it for your business and rent out a room or two and then you are renting to your business and to the roommates and your rent is then free?  If you can make those numbers work then DO IT!  If you think you could afford to pay a little towards the house payment then I might still try it out.  If your business can not pay rent and leaves you hanging with no income ditch the business and the house.   

Good Luck!