Corrado79
New Contributor
Hey everyone, I am getting very close to doing my second deal (own a rental Condo), but I have come to a pass and need help from all of your wonderful minds.
I am looking at getting a SFH (actually, more like a Townhouse) which is located in a development near a medium sized college in Colorado. Over half of the residents are families, with the remaining being mostly students. I am looking at two properties and cannot decide which is the better investment. Both of them are priced equally (around $125k). The development was completed in 2004.
Property (1) - 2 bedroom / 2 bath (with a garage)
This property has had some slight improvements (granite/marble countertops, tile instead of linoleum, etc.) and is in great condition. It is currently being rented out at $950/mo through 9/08 by a family with a child who allegedly plan on staying for awhile. That rent appears to be about $100 over market, which could be problematic if the tenants leave when the lease expires in September. These are the most popular units in the development and sell and rent easily. I have calculated its cap rate (using the current rental figure) at 6.1%.
Property (2) - 3 bedroom / 2 bath (no garage)
This property is also in good condition, but without improvements. It is currently being rented out by college students for $850/mo through 12/08. That rent appears to be about $100 under market (it's rented out to the current owner's daughter), which will stick through December. These units primarily only rent to college students because they don't mind the lack of a garage in the winter. Accordingly, the resale market (really only investors) is somewhat slim. Current cap rate is 5.5%.
My plan is to hold and rent the property in 5 years, where I will either sell it if the market is strong or refinance it. Either way, I would like to have some equity available in 5 years to roll into another property. In the interim, I am only putting 5% down so the property only slightly cash flows/breaks even if there is no vacancy or major repairs (possible, but unlikely).
Thoughts? Which one would you take and why? TIA! :thankyousign:
I am looking at getting a SFH (actually, more like a Townhouse) which is located in a development near a medium sized college in Colorado. Over half of the residents are families, with the remaining being mostly students. I am looking at two properties and cannot decide which is the better investment. Both of them are priced equally (around $125k). The development was completed in 2004.
Property (1) - 2 bedroom / 2 bath (with a garage)
This property has had some slight improvements (granite/marble countertops, tile instead of linoleum, etc.) and is in great condition. It is currently being rented out at $950/mo through 9/08 by a family with a child who allegedly plan on staying for awhile. That rent appears to be about $100 over market, which could be problematic if the tenants leave when the lease expires in September. These are the most popular units in the development and sell and rent easily. I have calculated its cap rate (using the current rental figure) at 6.1%.
Property (2) - 3 bedroom / 2 bath (no garage)
This property is also in good condition, but without improvements. It is currently being rented out by college students for $850/mo through 12/08. That rent appears to be about $100 under market (it's rented out to the current owner's daughter), which will stick through December. These units primarily only rent to college students because they don't mind the lack of a garage in the winter. Accordingly, the resale market (really only investors) is somewhat slim. Current cap rate is 5.5%.
My plan is to hold and rent the property in 5 years, where I will either sell it if the market is strong or refinance it. Either way, I would like to have some equity available in 5 years to roll into another property. In the interim, I am only putting 5% down so the property only slightly cash flows/breaks even if there is no vacancy or major repairs (possible, but unlikely).
Thoughts? Which one would you take and why? TIA! :thankyousign:
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