Questionable 1st Rental Property

[Shane Braunworth]

I am looking to buy a house listed at 250k in a nice neighborhood. It is near Ursinus College which is reputable school, not a party school, so renting out units should be easy for 1 year leases with the potential to have one student or group of students for 2-4 years aside from potential long term tenants. It is currently being rented out for $2025/month gross rent. Assuming I buy at listing price and have a 4.5% APR on my mortgage there is no money left over (no cash flow) after accounting for vacancy and maintenance savings/expenses. (8% vacancy and 1% of 250k for maintenance) Long term this makes sense as upon sale of the house after 10-15 years I would get around 8-10% Annualized ROI assuming I sell at 250k. I am looking for the opinion of those with rental experience since I have yet to own any real estate of my own. Important note: The house as is needs very little to no repair work as the current owners have taken good care of the property for 33 years.

Thanks,

Shane

[Joe Villeneuve]

Keep in mind that any negative cash flow during those 10-15 years reduces the return you think you might get in accumulated appreciation from those 10-15 years.  You're banking on something you have no control over while giving away what you can control.

What you are doing in the end, is rationalizing a bad deal into a good one.