What's your opinion on this not-quite-hypothetical deal?

Question

I have a not-quite-hypothetical situation that I'd like everyone's opinion on. The scenario is real, but I'm going to simplify it a bit.

Imagine that the house on one side of your current residence comes available. The owner agrees to sell it for $15K when it's worth $160K–170K.

Imagine that the house on the other side of your current residence comes available at the same time. That owner is looking for $150K–160K, and it is also worth $160K–170K.

Both houses would rent for about $1500 a month.

Of course you buy the first house. That's a no-brainer.

But what about the second house? It probably won't cashflow for the first few years, but the first house would float it. If you bought it, you'd own three 3BR/2BA in a row in a neighborhood that you expect to steadily appreciate.

So what do you do? Do you buy one house or two?

Andrew B. · Answer

I think both arguments have their own merits. By owning three houses next to each other, you can protect them to a certain extent, but you also triple your downsides in a market downturn. Especially if the rental market dries up in that town. I personally would not do it unless it was an amazing deal.

Collin Garbarino · Answer

I hadn't thought of it as putting "all eggs in one basket." I suppose I thought that having three close together might protect the investment because it would ensure a certain quality of resident.

It's good to get that perspective.