steven975

It seems like people line up like lemmings to buy rental property in my area without thinking about it.

One example:
There are some condos in the $150K area near me. They are kinda small, so you could realistically only expect about $600/mo, and the condo fees are $500/mo.

So, basically, you've only got $100 after paying condo fees. Throw in taxes for $400/mo, insurance for probably $400/mo (FL we're talking about!), as well as your Principal and interest payment and you're down a shitload, even after doing your taxes. Don't forget hurricane repairs, which are not covered up to 5% of your property's insured value.

Even if you hold them as investments, you're still paying 7% per year, which is well over the long term historical real appreciation. Even if it did surge again (it won't most likely) all the cash you've put into it will still put you well into the red. Still, you see people do it all the time!

It's not just this example. There are many condos in the $700K area that rent for about $1500. Basically, why not rent.

I wished I still lived in TX where you could be cash flow positive within 2 years when buying rental property!

CalBear

Most people are banking on appreciation. But take note from those financial advisory commercials on tv: "past performances do not guarantee future results".

If you're going to be living in one of those things, then it'd make "some" sense. Some people just want to live in a place they can call their own and decorate it their own way. Also, there are potential tax savings. But from an investment perspective, I'd say wait until the rent catches up some so you're not losing so much every month. One thing to consider is the Section 8 type housing, which in some cases, will get you more than the market rent. Maybe someone like Scot can chime in.

CalBear

Just saw this on CNN.com. Thought I'd past it along:

http://money.cnn.com/2006/12/20/magazines/...dex.htm?cnn=yes

no_really

"Why not rent," indeed. If you aren't borrowing the entire purchase price, it can make sense. If you are out to make a quick buck, it is a fool's game, I agree.

As for the link. Um, yeah. "Slated to rise" only means a lender hopes to generate business. I think most real estate people in this country are a bit more realistic, trying to sell properties based on the idea that it is more of a buyer's market, now that sellers have found the hugely inflated sums they financed five years ago are not forthcoming. Either way, in many markets, there is a glut of condo conversions and new condos, so unless you were buying a place to live in, I wouldn't touch a condo. And I certainly wouldn't put a deposit down on units that haven't been built yet.

Scot

When looking at properties to buy, I have seen the same basic thing. It must be the anticipated appreciation, or lack of understanding of how the world works.

I hear "its a right off" a lot, as if you would *want* to lose actual cash on a rental property...doh.....

I could see buying a place that in a worst case situation it breaks even with a 30 year mortgage..... at least you are paying down some of the debt and hoping it goes up in value.

Are the properties you are talking about actually selling? I never look back at my local places to see if they sold or not.

steven975

Probably not going to happen for a long time in my area. There is a glut of supply and high vacancy. Rent really is determined primarily by supply and demand, unlike the price of housing in my area.

jasonw

What is the difference between VD and a Florida condo?



You can get rid of VD!

Scot

cruisinhondas2k

Scot's situtation is consider one of the nicest section 8 tenants you will ever find. Yes there are some good section 8 tenants, but the majority of them will give you a headache and will damage you financially. Thats why there in section 8. For most of them your better off leaving your unit vacant. Yes you sign a yr lease with the tenant, but most section 8 tenants knows how to manipulate the system. I can go on forever with horror stories, but to keep it short it'll take a 7 months to a year to kick them out. During that time your not receiving any rent and on top of that you have to make repairs of damages that you know they cause, but they'll say it damaged by itself.

Section 8 will get you more than market rent? Not in NYC. Section 8 has always offer rent below market value in NYC. Section 8 is also the last thing you want to go to. Like I said before some landlords prefer to have their unit vacant than renting it out to section 8(dead beaters). Go to section 8 office you'll see a majority of landlord complaining about their tenants and want to kick them out. In some cases the landlord offer to pay cash to the section 8 tenant to leave the premises

Amit

good rental property is a bitch to find right now. screw making 6-8 % return sitting on my ass. I'd rather make 25-35% while I'm young. Maybe further down the road, I'll be happy with that kind of return (considering I have enough invested).

___________


and scot it's a "write off". your spelling is getting worse by the day. You might want to consider getting the latest firefox browser. It as spell check as you go, kinda like MS Word.