Right or wrong idea? Please help

[Brian Heimerdinger]

Wondering if I am off base on my plan. I was planning on trying to purchase a rental a year for the next 10 years, but after looking at this site I'm not even close to percentages of return you guys all look for. I currently have one condo I'm renting at 1555 a month and purchase price was 260k, I put around 10% down and just paid off the mortgage insurance, (year later). It currently was appraised at 300k so have gained a little in the past year. I was looking at another condo to purchase soon, but now wondering if that is the right route, as it seems that condos aren't looked upon as highly as multi family places. I have decent income and am only looking long term for passive income so I'm fine taking my time paying these off. Ultimately was hoping for 10 places for passive income later on in life while still having the equity. Wrong idea? Thank you for the help.

[Andrew Johnson]

Brian Heimerdinger Two challenges with your strategy (please note I'll throw out the same disclaimer as others --- ignore my opinions if you don't like them!):

1.) HOAs can change their collective mind on a whim. And the percentage of rentals in a complex can (in some cases) impact financing. They can increase their fees, reduce the percentage of allowable rentals, make "special assessments", blah, blah, blah. It's just another point of risk exposure for an investor.

2.) "No cash-flow" deals aren't always the worse idea on the planet. I like cash-flow, prefer it, but I'm not going to judge someone that makes an educated bet on an appreciation play. That said, if "the market turns" both values and rents typically drop. I can take a 20% hit in collected rents and still cash-flow. The person who is at "break even" right now on an appreciation play will have to come out of pocket (negative cash-flow) if the market turns. If you have a W2 that can get you through that hiccup, great. If you don't you're in a world of pain. After all, that appreciation probably was washed away with the decline that led to rents falling.

My net point is that on appreciation plays your buffer goes away. Over the past 7-8 years investors have been able to get that buffer back as interest rates dropped from 6.5% to 4%. I don't think rates will drop 2.5% from, what, ~5% now so that "future buffer builder" has gone away. Again, my opinion there. If real estate drops maybe the fed will plunge rates and there will be sub-3% rates. I'm no economist so what do I know?

Anyway, I don't want to paint a negative picture. I think you're better off buying a property you believe in, in an area you believe in, for reasons you believe in. You know your local market, investment locations, etc. way better than I do.