Buying my first rental.

[Lafi S.]

Hello all,

I've been working on a short sale for a few months now that I just received approval on. I am buying this as my first rental unit b/c I it looks like a great deal. Here are the details...

Property Description:
Condo 1 bedroom 1 bath. 507sqft with 2 levels.

PP: $47,500
Taxes: $1,400/yr
HOA Fees: $220

Rental- $1,100 Section 8

The property is in reasonable condition and the tenant told me she wants to stay because she has been there for two years. Her portion of the check has also shown to be consistent and on time..

So what does everyone think? It looks like a home run at that price and rent. Any and all advice is appreciated!

[Aly W.]

Mitch Kronowit said "I've owned a condo for almost 2 decades now and it's been one of my best investments. I really don't care that I don't own the "dirt" because 1) I didn't pay for the dirt, 2) I don't rent out the dirt, and 3) I won't ever be selling the dirt. Besides, if banks consider condos "real" property, unlike a manufactured home on concrete piers, that's good enough for me."

I agree. I've owned/lived in my condo for 15 years. It's extremely well managed in an excellent area, great school system. HOA fees have gone up maybe $150 in all that time. Our only special assessments have been for extra snow removal the last 2 winters. Can't be helped, Mother Nature whacked us. We do have foreclosures here, and have found ways to reduce our operating costs rather than just constantly raising the fees. Taxes in NJ always go up, regardless of owning a condo or SFR. Doom and gloom in condo investment is not a given.

If the HOA is strong and the property well maintained (you can find out these things before you buy, request financials too), you should be fine.

SFR properties, and we own 2, are not bulletproof either. People complain about HOA fees and maintenance issues, but SFRs have unforseen problems too, and when things break, they break big. There is risk in real estate as in everything else. My SFRs are in a city where the property taxes have gone up nearly 20% the last year, thanks to our new governor cutting state aid to that city and property values having declined by more than half.

Have a good reserve fund for these things and think long term.

We've bought several condos in FL. Last one was $42K cash, taxes $700 a year, insurance $750 a year, maintenance $280 a month, rent $900. The maintenance fees are similar with all of them in that area. All excellent areas, and we're holding for the long term. Property values will go back up eventually, but our plan is to buy and hold for at least 15 years.

Don't let analysis paralysis take over. Good luck!