Condo Rental Yields - Reality Check

[Robert S.]

A scenario I'd like advice on:

Condo rental yields in my targeted area (20 minutes from my home) are typically about 8% right now. That is annual rent/purchase price. A two-three bedroom condo sells for btw $100,000 and $170,000. Rents are generally between $800-$1200. They are easy to rent out and students or young married couples are the main tenants. There are three big universities within 20 miles so lots of demand. The condos are all nicely maintained and no more than 15 years old. I own a number of units like this all purchased since the downturn.

Occasionally, I am find opportunities to buy a short sale condo in the same targeted area with about a 10% gross yield. I generally find insurance, management fees, and taxes cost about two percentage points, so my net yield is 8% for these units. Let's leave leverage and taxes aside. I have purchased a number of these condos in recent months. I intend only to buy short sell units from here on out.

On these forums I see examples of people purchasing condos and SFHs for higher yields. Typically, I note two characteristics about these properties. First, they appear to be in neighborhoods that sound older and run down as well as the properties themselves. Secondly, they tend to be in a price range of $40-$50,000.

My question is this. Are there condo investors out there who are finding gross yields of higher than 10% for situations in which (a) it is relatively easy to keep the apartment full year-round (b) the condos are relatively new and in nice condition... I'd happily put my parents or a relative in any one of those I've purchased (c) they are in the $100,000-$170,000 price range. The price range is important to me because at $50,000 per unit and with the amount of capital I'd like to use over my investing career, I'd have too many units.

I get the feeling that to get yields in excess of 10%, you have to (a) purchase cheaper more rundown SFHs or condos in lower income neighborhoods (b) have your properties spread out across large areas that are more difficult to manage - my properties are all within a 20 min. drive of my home and in most cases I have multiple condos in the same complex or (c) purchase properties that have a theoretical high-yield, but actually keeping them full year-round isn't very easy.

Very interested in other people's thoughts….Are my impressions completely off-base?