First Investment Property - would you buy this SFH?
As the title says, I'm looking to buy my first investment property and hoping ya'll can help me figure out if it's a good deal or not. It's a small but nice turnkey SFH (2 bed, 1 bath). I'd be using a property manager. Here are the numbers:
Anticipated Sale Price: $44,900
Down Payment: $8980
Closing Costs: $2500
Repairs: None
Rent: $750/mo
P&I: $167/mo
Annual Income: $9000
Vacancy Rate: 5% ($450)
Mgmt Fees: 10% ($900)
Cap Ex: 8% ($720)
Maintenance: 8% ($720)
Annual Taxes: $1500
Annual Insurance: $550
Annual P&I: $2000
There are also tenant turnover fees that would cost about $650.
Year 1 (new tenant)
NOI: $3510
Annual Cash Flow: $1510
Monthly Cash Flow: $126
ROI: 13.2%
Cap Rate: 7.8%
Year 2 (assuming tenant stays)
NOI: $4160
Annual Cash Flow: $2160
Monthly Cash Flow: $180
ROI: 32%
Cap Rate: 9.3%
You get the picture.
The potential red flag for me is that my monthly cash flow would be either $180 or $126 -- and this is all dependent on tenant turnover. Let's assume the tenant turnover is every 2 years, and let's also assume that I hold the property for an even amount of years. In this case, we could just average out the two numbers to equal an overall monthly cash flow of $153. That's solid, but a bit lower than what I was hoping for.
Another potential red flag is CapEx. I would only be saving $720/year for CapEx, so if I got unlucky and had to deal with a large capital expenditure, it'd eat up my cash flow.
However, as far as I know the property is in very good condition. So the risk for a large capital expenditure is small. Also, Zillow says the property is likely to appreciate by 5% next year (not sure how trustworthy Zillow is, though).
Anyways, back to my question -- would you buy this home as your first investment property? It seems pretty low risk to me, with a moderate reward. I'm itching to get into the real estate game soon, but also trying my best to not act on emotions. Let me know what you think.
Thanks all!
-Brendan