This house is in a great location—on and off one of the town’s main thoroughfares. When we bought it, the house was recently remodeled: 3 bedroom, 2 bath; 1600 sq. ft.; and a nicely built-in garage that served as a bonus room. Below is some of its financial breakdown at the time we bought it:
Purchase Price: $160,000
Down Payment: $24,000 (15% of purchase price)
Amount Borrowed: $136,000
Monthly Rent: $1,200
Monthly Payment: $753 (63% of the gross rent)
Monthly Free Cash Flow: $172
When I bought this property, I knew that the debt service (or monthly payment) was a little higher than I would like it to be (63% versus 60%). However, when I included the home in my rental portfolio, I knew that the other properties would offset the cost.
The biggest reason I purchased this property, however, was because I owned the house next to it and could have more control over the area if I owned both homes. In this case, having adjacent properties was worth the higher debt service—especially because the property still had strong cash flow.