Posted by Matt in Mich on July 21, 2003 at 14:58:26:
John,
I’m new also, and looking for my first deal, so
many here can give better advice than I, but I read
a lot here and at other sites…
If you are putting 50K down, with a 140/month positive
cash flow - that seems razor thin to me.
I would look at comps for this condo - and see if you can get a purchase history on it, and others in the area, to see how they have appreciated in the last 5 years.
Also - a lot depends on your personal situation. Maybe
this 50K represents a small part of your money available for investment - or maybe it represents all of it.
If it’s a small part of your overall investment dollars - my personal opinion only is that it might
be like a speculative stock - something to try in a hot market.
If it’s a larger part of your investment dollars - I’d be cautious - as it seems that with 50K, you could find several rehabs, etc., and have a much higher chance of profit on some deals.
Of course, the future is unknown. The economy may roar back in 2004-2009 - and this condo might triple over
that time. Who knows. Just my thoughts.
I’d get the purchase history and comps either way though.
I’m thinking of buying a 1 bed or 2 bedroom condo for investment in the Mclea, Virginia area…
One bed rooms are selling for $189,000 ~ $226,000
while some nicer 2bed, 3bedrooms are all the way up to upper $300,000!!!
Fairly new and in good condition… with the existing tenant I would have a positive cash flow (but barely)
What I don’t understand is,
they are selling like hot hot hot HOT cakes
even though the prices are so darn high.
(seriously, you can buy a brand new SFH , townhome
for $300 something in another area!)
Are these condos a good investment
or just hyped up from the current home-buying craze?
Re: McLean, VA Condo repost) - Posted by matt in mich
Posted by matt in mich on July 21, 2003 at 13:22:27:
John,
How would you buy it - all cash - or terms?
How much down - how much per month?
What would the rent - and positive cash flow be?
You’d keep renting it, correct?
What about repairs, etc.?
Will it be positive cash flow after the monthly assoc dues? What about the condo assoc? Are they in good shape, with reserves? Any problem in their charter for
rentals?
The purchase price is $226,000 for 1 bedroom condo
Condo Fee: $110 / month
I will have 20% down
which is around $50k including all closing costs.
5% interest rate at 7 year ARM…
I intend to keep it for 5 ~ 7 years at least, depending on how it turns out.
Payment (W Taxes, condo fees, princpl, intrst): $1310.00
Existing Tenant: paying $1450
Lease : tenant staying until 3/1/2003
bottom line: about $140 positive cash flow…
The condo is only 5 years old, very new, and in excellent shape. It’s selling extremely fast. The neighborhood has a mediam household income above $150,000 and average home price is over $1million.
The condo used to be an apartment complex before turning into a condo.
You’ve already received good advice, but I’d like to add one thing you should consider.
Those condo fees are awfully LOW, so I’d be concerned about the financial strength of the HOA. I’d be concerned about special assessments being needed because at $110 a unit, the association probably doesn’t have a lot of cash on hand for emergencies.
Comparison point: I’m working a pre-foreclosure on a condo over in Falls Church (only a few miles from McLean). These are vintage 1962 models and the 2brs have a condo fee of $243 a month, and the 1brs are right at $200.
This is a terrible investment deal. Forget it today.
And planning to hold for 5-7 years seems to me like a terrible idea. What possible reason would you do that?
My advice is either to hold for the long term or else to do real estate merchanising–buy below market for a quick resale near market to make a profit. One or the other. Never anything in between.
What economic benefit do you want most from the investment? Cash Flow or Appreciation? Cash flow here is terrible, as Matt(MI) points out. Condos typcially are much poorer appreciation investments than are detacted single family homes.
You are looking in a price range that is terrible for cash flow. If you want cash flow, shift down to properties that sell for less than $70-80K. Less than $45K is still better if there are some in your area. The higher the value of the property, the lower the ratio of rental income to the value of the property. So high-priced properties are poor for cash flow.
I don?t want to burst your bubble, unless you?re buying for future appreciation you could do a lot better. The Market Value on that income with a 10% CAP Rate is $168,300. Considering a 5% vacancy your Cash Return is $810.00 making your COC return 1.6%.