Just Sold a Money Maker
I have been working with a client for some time who wanted to make an investment into a condo. We talked at length about investment property and money in general. His situation was probably the best case scenario for getting into a condo. He was able to pay cash, we found a condo that was clean, good management and low HOA fees.
For just about everyone, return on investment is huge and the more stable the better. my client was faced with what to do, invest in some stock or buy some property. I am not a pushy real estate agent and really would rather someone do what they need than get a commission so, we talked this out.
Condo purchase scenarios:
Purchasing with a loan - Much harder to turn a profit. Paying interest, Long time to pay off. You have to deal with the whole process of qualification of not just you but of the condo and its value. The payments of the loan come out of the proceeds of your rental. Many do not think this through entirely before getting into a condo and for some this can be precarious.
Purchasing with cash - As they say, cash is king! For a cash investment, I like to look at the return compared to other ways to invest. In this recent sale, the condo sold for $156,000 for a studio. We negotiated a good deal there. The potential rental proceeds are $28,000 per year. The HOA fees are $4300 per year. So, $23,700 is the adjusted proceeds. Depending on the type of rental management, as in self or through a rental management company, you could take 10-20% out as well.
Basically, he will get $20,000 back per year. If you do the math, in less than 8 years he will get %100 of his money back. The property will appreciate as well. In the end, he will have a pretty dependable return.
For my personal investing, growth and return are great but depend on timing. Real estate is my favorite. Real estate will rise and fall but over time typically comes out ahead in my book.
So, back to condo investing. There are costs associated with getting a condo that everyone should look at. HOA (Home Owners Association) fees can vary greatly from condo to condo. You also have to keep your condo in a condition where people will want to stay in it when they vacation. This means that you will have to update, repaint and repair from time to time and on regular intervals for things like furniture replacement.
Every situation is different. I am always available to have a conversation about property.
Let me say that I am not a certified financial advisor. My information is relevant to this area and type of market but use it at your own risk. This post contains personal views with no exact calculations on purpose.