Advice For After College (CONDO v.s. HOUSE)

[Charlie Krzysiak]

Hey you guys would love your advice below!

I am graduating college next December and am moving to Dallas to work full time. My brother currently lives in Dallas and pays an arm and a leg to rent an apartment (He is married so cant house hack). To me it does not seem worth it and would love to hop into real estate right out of school rather than pay crazy rent. Because of this, I have been running the numbers on many properties and doing my research in the Dallas area. I am from Dallas so I am familiar what areas would be considered "ideal". After my internship this summer I will have about 20k in the bank. 

However, upon research I have discovered it is really hard to find cash flowing HOUSES in good areas in my price range. 

What are your thoughts on condos as a first investment? I am finding some that are below 200k that are not that bad in condition. Are condos are good way to get your foot in the door? In my mind a condo will provide me:

-CAPEX is controlled by HOA (I only have to pay, not dedicate time)

-Low down payment

-Cheap financing payment

I plan to live there for 3-5 years and after could expect a NIAF around ($200). Is that really that bad if I will be getting equity and plan to live there for 3-5 years? Assuming rents will increase surely it will cash flow at some point correct? Also I know HOA fees can be outlandish.

Or, would you guys recommend me keeping my money in my pocket, getting a cheap apartment my first year of work, and watching for a 300-400k HOUSE while saving?

Clearly there is a lot of competition in the Dallas market. Do you guys think there is an option to find a property in my price range that will cash flow in a good part of town? I could also look at suburbs to find better deals. 

Thanks for input,

Charlie

[Jaron Walling]

@Charlie Krzysiak You have options, time to learn, and local contacts. There's nothing wrong with renting for a year, getting your shoes on the ground, and learning more about the market. Don't be in rush to buy RE unless you narrow down your location and have a buy [box] ready. Yes, condo's are a good way to get into the market but historically they don't appreciate as well. 

Unless something drastically changes in the economy we're living in an appreciation market. Supply is lower, interest rates high, and people are locked into there houses. Cash-flow is not "found" it's created. It comes from deals like seller financing, BRRRR, house hacking or a combination. Look for future value in Dallas, TX and buy it. You'll make more $$$ in 5 years holding expensive property in better locations. Just depends on your buy [box] and budget. You'll make lunch money for cash-flow. When I started I gravitated towards HOUSES and BRRRR because that's what I could afford (started with $25k and put 3% down). Rode my bike around the area numerous times. I leveraged some rehab skills most of which I learned as I went. I found a cheap distressed house in a C class neighborhood and lived there for 2 years. It was part of my plan before I even made the offer. 

Leverage your brother and other locals. Ask them about neighborhoods and get details at a street level. This is value information that others probably don't have. Combine that with local agent to "push paperwork" for you and you'll buy the right property. 

[Michael Diossa]

Unprofessional opinion- For me personally I would not want to live in a condo. HOA have all weird rules. Doesn't even feel like you own your unit sometimes. Fee's are also expensive for nothing (using nothing loosely).

However ever if the numbers are done correct, you can buy one for a good price, live in it for a few years then sell it at a profit ish (Covers what ever extra you paid into the unit) to then migrate to a home instead of renting.

This is if you purchased at a good price.

For investment only?? You can definitely find some gems to flip and make really good profit. 

Don't sleep on condo's on flips.

[Kristin Flores-Brockman]

Quote from @Charlie Krzysiak:

Hey you guys would love your advice below!

I am graduating college next December and am moving to Dallas to work full time. My brother currently lives in Dallas and pays an arm and a leg to rent an apartment (He is married so cant house hack). To me it does not seem worth it and would love to hop into real estate right out of school rather than pay crazy rent. Because of this, I have been running the numbers on many properties and doing my research in the Dallas area. I am from Dallas so I am familiar what areas would be considered "ideal". After my internship this summer I will have about 20k in the bank. 

However, upon research I have discovered it is really hard to find cash flowing HOUSES in good areas in my price range. 

What are your thoughts on condos as a first investment? I am finding some that are below 200k that are not that bad in condition. Are condos are good way to get your foot in the door? In my mind a condo will provide me:

-CAPEX is controlled by HOA (I only have to pay, not dedicate time)

-Low down payment

-Cheap financing payment

I plan to live there for 3-5 years and after could expect a NIAF around ($200). Is that really that bad if I will be getting equity and plan to live there for 3-5 years? Assuming rents will increase surely it will cash flow at some point correct? Also I know HOA fees can be outlandish.

Or, would you guys recommend me keeping my money in my pocket, getting a cheap apartment my first year of work, and watching for a 300-400k HOUSE while saving?

Clearly there is a lot of competition in the Dallas market. Do you guys think there is an option to find a property in my price range that will cash flow in a good part of town? I could also look at suburbs to find better deals. 

Thanks for input,

Charlie

 Someone mentioned the possibility of renting for a year to learn the market. I do agree with that.

There's also been some negative comments about condos. While they gave great advice, they don't live in DFW. Yes, personally I would not want to live in a condo. However, in markets, like Dallas - proper, condos do well, but there are so many things to consider. Property taxes, HOA, amenities the condo offers, neighborhood, upgrades, etc...

There are some great submarkets around Dallas too for SFH

I am a local Realtor, reach out if you have questions or need assistance finding anything. 

[Terrance Teague]

It’s awesome that you’re already thinking strategically about getting into real estate early on, many people wait years before taking this step, so you’re ahead of the game.

You’re right about Dallas being a competitive market, and finding cash-flowing houses in good areas under $300-400k can be challenging, especially with rising interest rates. However, there are definitely opportunities if you stay flexible and informed.

Condos can be a good way to get started in real estate, especially since the lower purchase price and potential for a smaller down payment can help preserve your savings while giving you an entry point into the market. Also Since you plan to live there for 3-5 years, it’s easier to manage and maintain, giving you time to learn the ropes of real estate.

That said, be mindful of high HOA fees, as they can eat into your margins and affect future cash flow. Also, consider the potential for appreciation and rental restrictions, as some HOAs have rules that might limit leasing later on.

Given your $20k starting point, a condo could work well as your first step into real estate, especially if you focus on one with a manageable HOA fee and potential for appreciation. Living in the property allows you to take advantage of owner-occupant financing, which is often more affordable than investment loans. Plus, the 3-5 years gives you time to gain equity and learn the market, setting you up for your next property.

Good luck!

[Rick Albert]

I started with house hacking a condo, it worked out well. However, times have changed.

There are a couple of things to consider with a condo:

1. At least in my market (Los Angeles), many complexes have been struggling financially. The buildings are getting older and they don't have the funds to do the repairs. So although you have HOA dues, sometimes it isn't enough and you don't have control over that cost (if it goes up, special assessments, etc.).

2. I strongly recommend looking at 3+ bedroom condos. They are going to be the cheaper alternative for SFR, so in theory you should get some decent appreciation gain and good tenant pool.

3. Look for fixer condos. Because it is mostly cosmetic, the cost to remodel isn't horrible but you can still get the properties at a discounted rate. That's what I did.

I'm not saying don't go for condos, but really do your due diligence on the HOA to make sure they are in decent shape so you don't get hit with bills later on.

[Taz Zettergren]

@Charlie Krzysiak when I graduated I rented for a year then got into a single family home and house hacked it for 2 years before I got married. Personally I'd prefer a single family over a condo just because of the control aspect and HOA nuisance. I know cash flow can be challenging in Texas but if you are anywhere near break even it's a win as long as you're in a good area because values are only doing one thing over time in that DFW metro. In the long haul that appreciation is going to be far more beneficial than the cash flow difference.

[Bruce Lynn]

Congratulations #1...on so many things.  Graduating college, not wanting to pay rent, saving a pile of cash, thinking about hacking.   There are a lot of considerations and maybe not one solution fits all.

Normally I say don buy condos for investment.  People like to fight on me on this and there can be exceptions, but for a ton of different reasons, they dont normally make great investments.  There might be a couple of exceptions I can think of in DFW area.  Now if you want to buy and live there forever or you want a specific location or lifestyle or the amenities, might be something to consider, but not for investment....they're for living.

Your best option right now depending on your income, is probably to buy at least 4bed house or 5 bedroom if you can make it work financially and rent bedrooms. That means no HOA neighborhoods, which rule out many places. 3bedroom might make it tough to work, unless you're sleeping in the laundry or garage and renting full 3bedrooms. Just depends on how extreme you want to take things.

As far as financing, condos can be tough. Many don't qualify for low down payment/FHA for a variety of reasons, especially the ones sub 200K. Condos can be tough to cash flow due to high HOA fees...and special assessments. Remember you pay the HOA fees even when it is empty...so when market is slow and it takes 2-3 months to rent, not only are you paying your mortgage, but also 300-$1000/month HOA fees. They can be tough to resell as well due to the higher down payment required for example. Study up on warrantable vs non-warrantable condos.

One idea I think for a fresh grad, is to find a great RV park operator. Buy you a super cheap used RV and be their "host" /park manager as a part time gig. As you get comfortable with the operation, maybe buy and rent a couple of those as STR/MTR/or LTR. Do that for a year or two and then help that owner buy another and you take a cut in the deal maybe in exchange for management. Do that 2-3-4x. Then buy your own, or turn that money into a 4-5 bedroom house and live there a year, and do it again. 5 years down the road you have 10-20% ownership perhaps in 2-3-4-5 RV parks and a couple houses. That's a great start at 25-30yo.

[Preston Dean]

Hi @Charlie Krzysiak

I wouldn't suggest a condo. Most of them have HOA's that run pretty high. There are some nice single family homes in the 230-250 range in the DFW area that you can get with 3% down and then fix up and rent out after a year.

If you have the desire and ability I wouldn't wait around for another year when you get here. 

Buy something then the following year rent that out and then buy something else. 

6% interest is better that 100% interest in rent in my opinion. 

Here to help!

[Wale Lawal]

@Charlie Krzysiak

Condos in Dallas offer affordability, lower maintenance, and strong rental demand, making them a good investment for those looking to build equity and reduce living costs. However, they can be expensive due to HOA fees and appreciate slowly. Single-family homes offer better appreciation potential but require a larger down payment and more maintenance. Suburbs offer lower prices and better cash flow, but may have trade-offs in proximity and commute. To make an informed decision, run the numbers, investigate HOA rules, start networking, save strategically, and explore suburbs with affordable homes.

Good luck!

[Jay Hurst]

Quote from @Charlie Krzysiak:

Hey you guys would love your advice below!

I am graduating college next December and am moving to Dallas to work full time. My brother currently lives in Dallas and pays an arm and a leg to rent an apartment (He is married so cant house hack). To me it does not seem worth it and would love to hop into real estate right out of school rather than pay crazy rent. Because of this, I have been running the numbers on many properties and doing my research in the Dallas area. I am from Dallas so I am familiar what areas would be considered "ideal". After my internship this summer I will have about 20k in the bank. 

However, upon research I have discovered it is really hard to find cash flowing HOUSES in good areas in my price range. 

What are your thoughts on condos as a first investment? I am finding some that are below 200k that are not that bad in condition. Are condos are good way to get your foot in the door? In my mind a condo will provide me:

-CAPEX is controlled by HOA (I only have to pay, not dedicate time)

-Low down payment

-Cheap financing payment

I plan to live there for 3-5 years and after could expect a NIAF around ($200). Is that really that bad if I will be getting equity and plan to live there for 3-5 years? Assuming rents will increase surely it will cash flow at some point correct? Also I know HOA fees can be outlandish.

Or, would you guys recommend me keeping my money in my pocket, getting a cheap apartment my first year of work, and watching for a 300-400k HOUSE while saving?

Clearly there is a lot of competition in the Dallas market. Do you guys think there is an option to find a property in my price range that will cash flow in a good part of town? I could also look at suburbs to find better deals. 

Thanks for input,

Charlie

@Charlie Krzysiak It was touched on above but condo's are completely different then single family/townhomes and even 2-4 units multi family properties. The reason for this is the condo project it underwritten just as hard if not harder then you are. This is because the financials of the condo project will directly effect the value of the real estate as a collective, as compared to just your financial health on other types. For example, buying in Dallas, we have a ton of hailstorms. What is a storm rips through and trashes the roof, BUT the condo project does not have enough insurance coverage to fix it, the value of the all the units in the project just went down. or, even if they are able to fix it but the coverage premium doubles so the HOA has to double the monthly HOA dues but half the complex can not afford it? You see the picture.

So, because of this a lot of the "affordable" condos you will see in DFW have financial issues and you cannot get a mortgage loan on them, and have to pay cash. or, maybe get some sort of non conventional financing that is much more expensive requiring 25%+ down.  I tell folks all the time if you cannot get someone experienced (Fannie/Freddie for example)  to give you money  to buy the condo you do not want to buy it. 

[Marcus R.]

Option 1 - I started with a condo and could be worth it if you buy right.  Look for condo/townhomes in smaller communities (8-16 units for example).  Buy something that can be a live-in flip and you're on your way.

Option 2 - Does it make sense to buy with your brother and spouse? Duplex, House + ADU, create walk-out basement etc...Agree on how the partnership will work in advance.