condo's as rentals ($35k, $185 HOA, rents $750)

[Jeff Thompson]

In the market I'm looking at I'm seeing a lot of condos that I'm thinking may make good sense as rentals. . There's quite a few similar to this deal:

35K ready to move in, 8k down at 25%, 27K financed. Zillow estimates $222 for mortgage, taxes and insurance ($122, $23, $78), lets say $250 as it will be a rental. HOA's are $185, so monthly expenses are $435 on the high end. Rent should be $750 a month, so that's $315 a month in cashflow rented with very little concerns of maintenance and repairs.

Using 30% of rent for vacancies and repairs (HOA's cover the building/grounds) we're looking at $525 a month or an expected $90 after expenses per month per unit, or $1080 per year. That's a ROI of 13.5% I believe, not the greatest returns in the world, but a pretty easy way to get it. I especially like that I could add one ever few months as I get the cash for down payments. I imagine the hardest part would be finding a bank willing to go along with my plan...

How does this look to everyone else?

[Aly W.]

My husband and I have been buying condos in Florida for cash, then taking home equity loans against them to buy the next ones. True, some complexes are not FHA approved, which would prevent us from selling them to a buyer who needs FHA financing, but we are buy and hold landlords.

It's worked out well for us. Our units ranged from $42K - $68K each, they rent for about $1000 each (some more, some less), HOAs are $300 each month, taxes about $700 a year, insurance about $600 a year. They are in good areas and are appreciating slightly already.

We've been using TD Bank. HELOCs range from 3.75% to 5%, 20 year terms. We self-manage, and have not had vacancy issues - we've had them rented as soon as we advertise them. Repairs - well, we had to replace 3 air conditioning units last year, plus assorted small repairs. We have 7 properties, something will always need fixing.