I’m curious what other buy and hold investors think about condo rentals in good areas vs. 2-4 units in worse areas. What would you rather have? Cash flow would probably be slightly better on the units in the worse areas. But tenants likely better in the condos in the better areas. The area I would be buying would be San Diego CA.
I would much rather have a property in a better area. Also, if they numbers don’t make sense in your market, then look elsewhere.
what about condos in SD vs. SFR’s in Phoenix?
Cash-on-cash return is probably about the same, esp since I could manage the condos in SD myself b/c I live here. You can get a 1 bed condo in San Diego for $90k that gets about $1,000/mo in rent. And a 3/2 house in Phoenix for $90k that gets about $1,000/mo in rent,.
What is your strategy? Are you mostly looking to buy and hold without refinancing? If you want to self-manage that imposes a limit to how much you could do past about 1 hours drive.
If you are looking for appreciation, then focus on demographics. If you want to focus on strong cash flow without much concern for appreciation, that will point you in a slightly different direction.
Tell us more what you are thinking. There is likely to be no right answer at the level of the initial question. Buy right and make sure the cash flow works for the hold period will keep you out of trouble.
cash flow and appreciation
Hi John,
I’m buying for a mix of both appreciation & cash flow, but probably heavier on the cash flow. I’m 41 y/o and I have 2 rental properties right now. Looking for a better return than the stock market. Right now in depressed markets with these low interest rates I can can over 10% cash-on-cash return with 20% down getting a conventional loan. I have good income, good credit, no debt and a decent chunk of cash in the bank. I can get 8 more conventional investment loans at 4.5% 30 year fixed right now. So I’m thinking of getting 2 more properties in San Diego where cash flow is not as good and 6 more out of state where cash flow is better to hit 10 properties.
What do you suggest? Looking at mostly condos and 2-4 units in San Diego with not great cash flow and newer built SFR’s under $100k in the former bubble markets (Phoenix, Vegas, Orlando). What do you think?
Personally I would prefer the condos in the better location.
Jim
condos are not the best investments
In your Cash Flow analysis, you need to include the association fees.
I’ve done well with some condos in SD, but they are not the best investment - the fees are high, and they’re the first to go down and last to go up.
So for CF, the units in SD are better. But for appreciation go w houses.
Side note - instead of renting, I exit on Lease Options and AITDs (for CA). At the end it accomplishes the same.
best,
m
I dont know anything about SD, but I do know that its almost always worth it (over the mid to long term) to buy in the best areas.
[QUOTE=AmotoXracer;883772]I dont know anything about SD, but I do know that its almost always worth it (over the mid to long term) to buy in the best areas.[/QUOTE]
I broadly agree. More so if the cash flow works. It might be common sense to focus on a good location that cash flows.
Think of it this way, when you go to sell who will be the buyer? You want it to be someone who will pay a premium to live there rather than an investor on a forum like this who wants to squeeze the highest return possible out of the property.