Does this deal make sense? (First time rental)
Hi BP, I've been hunting for my first rental property for awhile now and been running calculations on this but keep wrestling with it in my mind.
This is in Denton, TX (2 universities in town)
New construction Townhome - $210k (3 bd, 2.5 bth, 1,670 sq ft)
I've had rental comps run in the area and for other townhomes renting in the complex and they are renting around ~$1,750.
20% Down payment - $42k
Income --> $1,750
Expenses (including principal, interest, HOA, insurance and taxes) --> $1,424
Cash flow --> $325
CoC ROI --> 8.63%
My biggest concern is this doesn't meet the 1% rule so I don't want to be paying a lot more than I should. However, being my first rental property I love the idea of starting with a townhome because it will be an easier way to start (the HOA takes care of everything exterior plus this is new construction so everything will be brand new). I also like the fact that this is in a busy college town so I figure occupancy will be good here. I'm just really excited to get my first rental property and start compounding from there but I don't want to be rushing into an over-inflated market.
I appreciate any advice on this!