My 2nd (possibly) rental property
I've found what I think is a good deal a .25 mile (maybe that far) from my current duplex. One thing is holding me up but here are the details and #'s:
Blue-collar, c-class neighborhood
847 s.f.
2/1
detached garage/workshop
directly across street from school
asking $19k
ARV $35K
Mortg. $184.92/month (financing $25k)
repairs $10k
Taxes $34/month from current tax records
Vacancy 10%
Repairs 5%
Ins. $100/month (est. based on what I'm paying at duplex)
I'm confident I can pick-up the property for $15k and rent it for $600 (currently rent 1 side of duplex that is 950 s.f. for $650). No major repairs like roof, foundation, etc. I will be updating kithen, bath, lighting, etc.
Satisfies the 2% rule and 50% rules
50% rule = $115.08/cash flow per month
Cap Rate = 14% (based on 50% rule)
I have a HELOC on my duplex that will allow me to purchase the property and then refinance at 75% LTV to repay my HELOC. I have already spoken with my bank and can get a loan at 4% but my bank is offering a 15yr term with 5yr fixed. I am afraid after 5yrs the interest rate will go up and my cash flowing property will turn into a cash vampire.
I've thought about keeping for 5yrs for cash flow and then selling for a small profit to avoid the interest rate hike. What do you pro's think?