Condo investment, is it something i should consider?
I had a buyer tell me that they didn't want to buy a multifamily for an investment, but rather buy a condo. With a condo, you pay fees to take care of everything outside, have a lower insurance cost, and lower taxes. All you have to do is make sure that your unit is ready to go and collect your little slice of rent.
Example Investment Calculation
Consider a $150k condo. Here is your math:
Down payment (25%): $37,500
Closing costs: $2,500 +/-
Out of pocket cost: $40,000
Monthly and Annual Expenses
Mortgage: $116,250 at 3% on a 30-year fixed = $490/month
Condo fees: $314/month
Taxes: $1,911/year = $970/month
Total expense: $11,640/year
Rental Income Scenarios
If you can rent this at:
$1,400/month = $16,800/year
NOI: $5,160
CAP = NOI/purchase price = 3.4%
If rent is:
$1,500/month = $18,000/year
NOI: $6,360
CAP = 4.2%
Conclusion
From a risk-reward situation, this isn't a bad deal since you have no real management cost and you have the upside of leveraged appreciation.
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