Should I buy my parent's house for the equity?
Hey BP! I am just starting out on my real estate investment journey and I need some advice. My wife and I have the opportunity to buy my mother-in-law's house for a good deal. She is willing to sell it us for $250k, and it is worth around $320k. Initially, I wanted to use a gift of equity as a down payment but then I learned that I cannot use a gift of equity on an investment property. So now my plan is to put 20% down on the house, rent it out, and refinance later to use that equity on another deal. What's holding me back is that it won't cash flow very well. It is a 4 bed 3 bath in Suffolk, VA. Similar homes are renting for $1800-1900. I ran the numbers on the BP calculator and I came up with $145 monthly cash flow and a 3% cash on cash ROI. Also, that is including property management because I live in Wisconsin and do not plan to manage my first property from that distance. So what do you think? Is the small cash flow worth the instant equity we will gain in this deal? Or should I hold out and use the down payment for something that gets a better return on investment? Thanks for reading!