7761 Heritage Farm Dr

Montgomery Village, MD 20886

$515,000D

4 bd · 3.5 ba · 2,532 sqft · Built 1993 · Townhouse · Pending · 6 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $4,011/mo
• Mortgage (P&I): −$2,701
• Tax + insurance: −$645
• HOA: −$150
• Vac / Maint / Mgmt: −$842
• Net cashflow: $-328/mo
• Annual: $-3,934/yr
• Cap rate: 5.53%
• Cash-on-cash: -2.73%
• DSCR: 0.88
• 1% rule: 0.78%
• Cash to close: $144,200

Investor read

• This is a 4-bed/3.5-bath townhouse listed at $515k.
• At list price, monthly cash flow is $-328 ($-4k/yr) — negative.
• To cash-flow at today's rent, offer at most $457k (11.2% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $401k (22.1% below list).
• Only 6 days on market — expect competitive offers; lowballing is unlikely to land.
• Recommended offer: $401k (22.1% below list) — sets the bar for 1% rule.
• Local home prices are declining (-1.0%/yr); year-one equity from $4k of loan paydown is wiped out by about $5k of value loss. Plan a longer hold.
• Location reads 62/100 on livability (#318 in MD) — a middle-class / working-renter tenant base. Strengths: employment A+, housing A+; Watch: schools F, crime D-, amenities F.
• Montgomery County Public Schools (suburban): math 27% / reading 45% proficiency, ranked #3 of 24 in MD (top 12%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Market conditions: Rents rising fast (+4.3%/yr); 123 active listings in the ZIP; 8 comparable units currently listed for rent nearby; rentals lingering (median 44d on market — plan ~5-8 weeks vacancy on turnover, expect pricing pressure); 50% of comp listings sitting > 30 days — soft ceiling on asking rent; solid renter incomes; 3,880 units permitted in Montgomery County in 2024 (2,054 in 5+ unit buildings).
• Montgomery County population projected at +27% by 2050 — long-run rental-demand tailwind backs the buy-and-hold thesis.
• 4 sale attempts since 27y ago with the ask held roughly flat each time — persistent listings suggest the price (not the market) is what's stuck; bring a comps-based counter.
• Climate carrying-cost: extreme-heat days projected 7→16/yr by 2055 (HVAC capex compounding) — expect insurance premiums to compound above CPI over the hold.
• Cap rate 5.5% vs local median 4.2% in Montgomery Village — top-decile yield for the area; either an underpriced asset or a hidden risk that comps aren't pricing in. Stress-test before assuming the spread holds.
• At $4,011/mo this rent would consume 49% of the median local household income ($99k/yr) (locally 1600% of renters already pay >50% of income on rent) — very limited rent-growth headroom before tenants either downsize or default.

Questions for listing agent

• What do current leases actually rent for vs. the listed asking? Can we see a recent rent roll and the last 12 months of T-12 income?
• What does the HOA fee cover, when was the last increase, and are there any pending special assessments or reserve-fund shortfalls?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• Schools are F-rated, which usually means shorter tenancies and higher turnover. Who's the typical renter profile here, and what's been the actual vacancy rate?
• Crime grade is D in this area — have there been break-ins, vandalism, or insurance claims at this property in the last 3 years? What carrier currently insures it and at what premium?
• The area grade is low — what's the realistic commute time and amenity access for the typical tenant pool here? Any planned neighborhood developments (good or bad) we should know about?
• What's the average days-on-market for RENTAL listings here right now (not sales)? A rising rental-DOM trend means longer vacancies and softer asking-rent achievability than the comps imply.
• What's the recent tenant-quality profile in this submarket — average credit score on applications, eviction rate, late-payment / NSF rate, and stable-employment percentage? A property-management company in the area should have these aggregated.