What's the worst that can happen? Buy and hold small condo(s).

[Jim Truman]

Good evening BP. 

My wife and I are very carefully and cautiously considering purchasing a rental unit. We've been very diligent about saving up for retirement and now that we have a good amount of cash on hand, I'm exploring the idea of rentals. 

Our goal is long term, passive income. I am fortunate to have a good retirement plan but would like some additional income streams to fund our retirement lifestyle. So some CF now will be good to fund expenses related to the property, but ultimately appreciation and future passive income from a mortgage free property is the goal.

I do not have the skills, interest, or desire to be a flipper.

I had a brutal experience in 2008 with a rental that I'd like not to repeat. So if I'm going to get into the game, our first property needs to be cheap and relatively maintenance free. I think a condo/townhome will be perfect.

Cheap: Less than $120,000 means I can easily afford the down payment and monthly expenses in case of vacancy. This also means I'll have to look out of state since we're in the DC area. I'm exploring some areas like Huntsville, AL and Augusta, GA due to the growth of these towns.

Maintenance free: my tenant destroyed my house. I think a condo where the only maintenance I'm responsible for is basically from the drywall in is a safe way to start. No landscaping, no clogged gutters, no rotting porches, etc. 

In a scenario like this, what are some of the downfalls? Assuming the numbers work so it's a good rental (1% rule, etc) how bad can it get?

If I need to evict the tenant I can easily afford the monthly expenses.

If my tenant trashes the place, I will, in the worst case, have to gut the inside. This is obviously a stretch but even if he damages it that severely, gutting an 800-1000 sq ft condo won't bankrupt me. 

Home warranties and insurance should help with unexpected dissastors. 

Thanks for your time and assistance. After my 2008 experience, I vowed I would never own real estate. But now that I am in a totally different financial situation, and have a friend experiencing some good luck with small condos he rents to graduate students, I'm starting to give it some serious thought. 

[Christopher Phillips]

@Jim Truman

You'll have to run the numbers, but in general, it's difficult to get a condo or co-op to cash flow due to the HOA/monthly maintenance fees. Plus, since you'll be doing it from a distance, that means a portion of you money will be going towards a property mgmt company. They charge 1 months' rent to place a tenant, monthly %, plus 1 months' rent every time a tenant renews.

Again, run the numbers, but they generally aren't cash flowing investments.