The bulk of your short term profits/losses will take place at the time you purchase your investment property. I've established a set of criteria with conditions to be met prior to my investment.
1. Rental parity - Will my monthly mortgage/taxes/HOA dues undercut the rental market, and if so, would it be enough to cover projected vacancies and maintenance? This is the first and most important factor to consider.
2. Building age - I only purchase units built after 1970. There is no precise science to this, but based on my observations on plumbing and electrical problems with older buildings.
3. HOA matters - Your investment will be in jeopardy if the HOA's finances are in peril, or if the HOA enters litigation. If an HOA is under litigation, then most lenders will not finance purchases of units under that HOA (in other words, cash only). This drops the price of each unit tremendously. Conversely, if you have the cash, you may WANT to purchase a condo under HOA litigation because once the lawsuit ends you may profit handsomely from a sudden spike in values.
4. Nearby primary residence - While I outsource the majority of maintenance issues, there are times where my direct involvement is necessary.
5. Would I want to live there myself? - I only invest in areas where I can envision a family member living in my unit if I decide to step away from the landlord business. This means a safe area, decent neighborhood aesthetics, and good schools. Whether the housing market booms or busts, a place to live in a safe area will ALWAYS be useful.
6. Regulatory climate - I only invest in areas where there is no rent control, no section 8 housing, and a legal environment where the courts do not predominantly view the tenants as the victims. I am by no means elitist and I hope it doesn't sound that way, but that is the honest truth. I know many well-intentioned landlords who have been ruined by bad tenants and courts that see them as slumlords despite receiving no rent for months. I want the world to be an affordable place to live, but rent control and section 8 do not really alleviate this issue and usually results in neighborhoods that get worse over time.
With investments of residential property such as condominiums, it is important to ask yourself what you are looking to get out of it.
ReplyDeleteCondo Investment
good day,
ReplyDeletemy personal strategy is to buy and hold for at least 10 years and build equity in the process. It's certainly not easy but there are gains to be made if work is put into it.