New Investor Questions: Condo vs. House

[Haley Powell]

I am 24 years old and have recently graduated with my master’s degree (read: not rich). I have a job secured in Dallas that pays $50k pre-tax, and I’ve been pre-approved for up to $211,000. I’ve been listening to BP podcasts (mainly the Money podcast, more recently the Rookie podcast) for a while and I really want to buy a place that I can eventually convert into a long term rental. I think of it as a partial househack as I’m not sure I can live completely for free with the real estate rates in DFW. What complicates this is that I will be working in downtown Dallas, which makes anything nearby rather pricey.

I’ve found a real estate agent that is well versed in real estate investing (which is a relief) and I’m now in the early stages of looking for a property.

She's sent me a list of properties within my price range ($150k at max) but they are all houses. Her take on this is that HOA's eat into profit margins and make it hard to make money renting, which is a fair point. My parents' concern (and I share some of these) is that any house I get in Dallas for $150k will likely be either in poor shape or in a poor location, either of which I will ultimately pay for (either in lower rent, poor tenant choices, or in renovations). They think that if I can find a cheaper condo in a nicer/safer, more centrally located area, I can command the rent to cover HOA's.

I don't mind buying in South Dallas or some other areas if I feel safe (I'll be a single woman, living alone, I've had run ins before) and I think my investment will at least hold its value. I worry that I won't be able to meet the 1% rule in that area at $150k, but if I lower my price range I may get into a rehab I can't handle yet (and I'd be competing w flippers). A condo would be closer to everything and would have built in location value but the negative of monthly HOA dues.

I see both points of view and I’m struggling to narrow my focus onto one or the other, which is in turn making things more complicated for my agent. What are your experiences with condos and houses in Dallas? What might you recommend as a starting point for a new investor? I’m open to learn and I’m eager to hear different perspectives.