First Buy and Hold!

[Joe Conklin]

I've been looking around this site for awhile and decided to make an account.  Just purchased a condo three weeks ago and had tenants in for a week now.  I'll share the financials and reasons why I decided on a condo as my first purchase.

2 bedroom, 2 full bathroom

Condition: Class A property, minor repairs and paint needed in order to rent.

Purchase price: $115,000

Mortgage (P&I): $450
HOA: $180
Tax: $235
Insurance: $30

Rent: $1300

Cash Flow: Rent - P&I - HOA - Tax - Insurance - Vacancy(5%) - Maintenance(5%)

Cash Flow: 1300 - 450 - 180 - 235 - 30 - 65 - 65 = +275

Total Cash Invested: $32,500 (closing costs, minor repairs, paint)

Cash on Cash: 275x12 = 3,300 / 32,500 = 10.15%

Reasons for investing in a condo:

1. I am very familiar with the area.
2. Good school system
3. Working professionals rent in the area.
4. House with similar dimensions in area are double the purchase price and double the taxes.
5. I work full time so a higher end area allows me to have less headaches.  Also not having to maintain an exterior is likely to take away some hassel as well.
6. Appreciation likely, same property sold for $150,000 in mid 2000's.
7. Researched HOA before purchasing, good reserves and managed well.
8. Wanted to jump in to real estate (paralysis of analysis for a year), as someone mentioned before "ready, fire, aim".

That being said, for my second rental I want a single family home.

[Nathan Emmert]

For your CoC you should also figure in Property Management and CAPEX... granted, with a condo the CAPEX may be a bit lower but you still have appliances and things in the unit that will need replacement. Do you have your own hot water heater and furnace or are those central?

With regards to Property Management, doing it yourself is like a 2nd job and shouldn't be figured into your CoC... think of it as a time value issue that you'll need to decide on your own (I save $130 a month in fees... but spend X hours each month or year dealing with stuff a PM would do). For some it's worth it... for others they can make more money doing other things (why make $30 an hour in property management when I can make $50 an hour flipping for example)... and still others don't want the hassles (*raises his hand to that one!!*).

With CAPEX and PM, your cash flow is going to be pretty poor. You bought at just under 1% rent (rent as a percentage of purchase price). That's pretty close to the break even point at today's interest rates. What's hurting you is the HOA fees and the high tax rate... you're over 30% expenses after just those 2 items (I try to buy properties with property taxes under 1 months rent).