My First Post: Condo investment / rental analysis. "Decent" investment?

[Scott S.]

Hi everyone,

My name is Scott and this is my first post on BP. First, I'd like to say how incredible this site is. I can't believe how much I've learned in the past few weeks just cruising through the forums. Thank you to everyone who contributes.

I'm 33 and my wife and I just had our first child. Working in sales with no pension, the thought of paying for my daughter's education seems overwhelming. I had this thought of buying an investment property for mostly a buy/hold strategy (a little cash flow would be great obviously).

I was initially looking at mf homes, but the amount of possible work, maintenance, and upkeep really scares me. So, I started looking into condos due to the fact that the hoa takes care of exterior maintenance. I know most of you don't agree with condo rentals, but let me know what you think of this.

The condo I would purchase is a 2br, 1 ba, 1050 sq ft, roughly $70k in a nice suburban neighborhood . Renters in this area generally seem to be responsible. Taxes are about $1500 per year. HOA fees are $200 per month. Liability insurance is only $150 per year. I'd put down 20% so my mortgage would be roughly $265. Rental income is going to be approx $925 . I spoke with the head of the hoa and they're very well funded. Special assessments are rare and the highest has been $19/month. They're currently 88% owner occupied and they keep a very close eye on that.

I used J Scott's rental analysis spreadsheet (awesome spreadsheet by the way) and it looks like I would bring in cash flow of about $2,500 per year and the tenant would be building about $1000 of equity per year. Is this a good investment? I know it doesn't fit the 50% or 2% rules, but it seems somewhat safe. My thought is this; I'm building equity that I can cash out in the future, not to mention the small extra cash flow, with minimal headaches or stress. My goal would be to buy a few of these over the next couple years.

As a newbie, I'd like to hear from you pros out there. Am I totally missing something or is this a reasonable low stress first investment? Let me know what you think. Thanks!