Opportunity in Michigan - Genuine advice appreciated

[Justin Bul]

I am debating on making an offer on a SFH in Grand Rapids, MI. I flew in mid-week to look at a series of places with my agent. Out of the 7 we saw, one was a standout in the terms of a decent value for the money. In some ways it is turnkey (mechanicals, quality finishes in high touchpoint areas), but in other ways there's additional equity to build from the start (space to add additional livable sq ft). Further, the area appreciated in the high single digits the last two years and is on-trend to do the same for 2025 and 2026. It also quotes quite well for a landlord-based insurance policy vs some other locations around the country.

The detriment is the investor-adverse non-homestead tax rate. In order to make the deal work under DSCR ratios, I would have to step up to a 30% down payment. Though I have this, it'd be taking a down payment investment from approximately 50k to 75k. This would be essentially moving assets from the market to an appreciating real estate asset, but it's still a large increase to pivot to unexpectedly. Is this a smart move still?

After loan approval, I'm not required to keep escrow, so I could keep funds in the market if I thought the holdings would grow faster than the market is improving. I'd functionally be doing a buy and hold deal with the property being used as a mid-term investment, so rent receipts would be decent (cash positive). I wouldn't be throwing money at a problem to force it to work, I'd more so be burying equity into the property which of course I could leverage into another deal.

Any offer would have to be at or potentially slightly above ask to be competitive. I'd ask for up to 2% seller credits toward closing costs (most allowed under my loan) and the usual contingencies which are still permissible in this competitive market. 

Purchase price: 260k (mid-term projections of 2.6-2.9k/month)
Down payment: 77k (approx)
Non-homestead: $6,200/yr based on new taxable value post-close
Landlord policy: $1,500/yr

No significant investment needed to improve the real property to the point of it being rentable, though there would be investment upfront to furnish and stock the home. Looking to benefit from the 100% bonus tax depreciation under Section 179 before year's end.

Would you do this deal?