Rental property. Does this make sense ?

Question

Hello,

Appreciate if you can share your thoughts on buying LTR hold n keep investment property in Frederick, MD. I have a condo in my mind listed for $325k, built in 2016, with HOA of $225 and most likely will fetch $2400 in rental income. I will go with traditional mortgage with 20% down. Thank you.

Kenneth Garrett · Answer

Account Closed

A few stats that were left out.  How much are property taxes and insurance.  At a 30 year mortgage of $260K the P&I payment would be $1560 plus $225 HOA = $1785.  Are rentals allowed in the condo by the HOA?  If property taxes are $100/month and insurance the same then you are at $1985.  Leave 10% of rent for maintenance and repairs $240 then your at $2198.  It’s about a 4% cash on cash return.  Not the greatest.  I would pass.  The return is very small.  I’ve made some assumptions here, but if can plug in the actual numbers maybe COC improves.  I’m not a fan of condos since the rules can change and major repairs that are needed for building could kill your cash flow.  The buildings fairly new so that’s a plus.

Joe Villeneuve · Answer

Not enough info.

1 - taxes and insurance2 - What is the property valueMortgage will be somewhere around 1600/month.  That leaves $575 for taxes, ins and the most important thing...cash flow.

With a DP of $65k, you would need at least $1000/month to come close to getting you cash back in 5 years.  Even if you waited 10 years, you would still need 500/m in CF to recover your cost (DP).  That would leave less than 100/month to cover T/I...not even remotely a possibility, so even without the missing info (see above), I'd say this was a very poor deal.

Jon Kelly · Answer

Account Closed tell us what your goals/metrics are. analyze the deal yourself and share the results. You should be asking for advice on certain assumptions, NOT if it's a good deal or not.

There are plenty of free calculators or use the BP calculator to help analyze deals.

Account Closed · Answer

Greatly appreciate the inputs.

Property tax is $250/pm and insurance $50/pm. There is a great demand for rental.

Wahin Suhail · Answer

Yes definitely. Rental property can be a great investment, especially if you are able to find a property in a desirable location that is well-maintained and reasonably priced. There are a few things to keep in mind when considering rental property as an investment, such as the potential for regular income, the costs of maintaining the property, and the risk of vacancy. With proper research and planning, rental property can be a great way to build long-term wealth.

Sergey A. Petrov · Answer

Vet your association! Is renting allowed? Are there move in fees? If there are, do your local regulations allow you to pass them on to your tenants? How are their reserves? Even with a newer building being, say, 20% funded will almost guarantee a special assessment in the next couple of years. What utilities are included?

Many investors stay away from condos. I say vet your association! Condos are a good investment. No roofs to worry about, siding to replace, sewer lines to dig up, fences to replace, driveways to recoat, the list goes on

Rental property. Does this make sense ?

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