You have a lot of feedback already on the purchase decision, but not a lot of rationale behind the advice.
Let’s just talk about this property as a long term rental holding. There are three advantages to rental property ownership
Cash Flow,Appreciation, and, [*]Tax Benefits
Ideally, you want a positive cash flow, a reasonable expectation of future appreciation, and the opportunity to shelter your rental income from taxes. Personally, I won’t buy a potential rental property unless two of these three advantages are in my favor. I suggest that for your first rental property acquisition, you want all three to be favorable to you.
The positive cash flow is needed because you need a cash cushion to pay the bills when you have a vacancy period, or an unplanned repair turns out to be quite expensive. Positive cash flow lets you build a cash reserve so that, in time, you can handle anything that comes up. If you hold the property long enough, your tenants buy it for you – free and clear ownership, courtesy of your tenants. The first question you have to answer is: What is the market rent for this property?
Appreciation depends upon several factors not all of which are under your control. The first is location. Is the property in a good school district, in a good neighborhood, and in an area that seems to be desirable? If so, then the cemetary next door won’t appeal to everyone, but someone will still buy the property if your price is right. This property will still appreciate like all the others in the same neighborhood. You can market the peace and quiet the owners will enjoy next to neighbors who never make any noise. If the cemetary view is unnerving, maybe you can erect fencing to minimize the view effect. I am just saying that the cemetary will present some marketing challenge, but if the area is appreciating then this property will also appreciate.
There are always buyers for every property, if the terms are right. Rather than a conventional sale, maybe you will do better to sell this property on a lease option or on a contract for deed to a credit blemished buyer. This buyer will not be concerned about the cemetary at all if he can purchase a house with no bank qualifying and with blemished credit. Plan for the buyer to repair credit over the next couple of years, then finance or refinance the property to give you a delayed payday.
Tax Benefits are a bonus. The depreciation expense allows you to shelter your positive cash flow, perhaps even show a tax loss on paper. Never buy a property just for the tax benefits if tax benefits are the only favorable advantage.
Appreciation is not guaranteed. For many markets, property values follow a traditional business curve. There will be period of rising prices, followed by a period of falling prices, followed by a recovery to even higher prices. This cycle repeats itself every few years. The trick is to sell at or near the top of the cycle, and buy at or near the bottom of the downturns. With long term rental property, you don’t need to be that concerned about your entry point. If you buy at the wrong time, your positive cash flow affords you the luxury of waiting for the recovery to push your property values higher.
Cash flow is most affected by the amount of your down payment. A property you purchase with 100% financing will not cash flow as well as the property you purchase with 80% financing. There are some criteria I use to determine whether the cash flow is sufficient to support the property, and whether my return on investment is good enough for the down payment I will make.
This site has a free cash flow analysis spreadsheet available to download that may give you a better grasp of these discussion points. Just click here
Cash Flow Analysis Spreadsheet
Ultimately, the decision to purchase this property is yours, and yours alone. A better deal may be just around the corner if you wait. Don’t be so anxious to purchase your first investment property – don’t be a motivated buyer.