Which type of property includes the least waste of money: mobile home, condo, or house?

3 Replies

Which type of home has the least waste of money: a $75,000 mobile home, a $250,000 condominium, or a $500,000 house?Less interest is paid on the mobile home and condo, but condos may typically appreciate less than houses and mobile homes even less.I am not considering the amount of the payments that contribute to equity as a cost.Lower appreciation and interest are two costs, but a third is opportunity cost, which is the amount that the down payment would return if invested instead of being used as a down payment.The down payment for a house would be much larger than for a mobile home and therefore would have a much higher opportunity cost.I understand that there are many variables at play with these decisions such as historical appreciation of each type of property, estimates of future appreciation, mortgage rates vs stock returns, geographical area, etc.I just want to know the rank of each type of property in cost when appreciation, opportunity cost, and interest are summed given reasonable estimates of each variable.Thanks for any replies.

You are forgetting the largest waste of money. Taxes. I never factor in appreciation to deals I make. In my opinion that is speculative investing, and I am not much for gambling. I think you are better off with more lower priced units, than one higher priced unit, their total value being equal.

If you are counting the money you have to put up or expenses as a waste then you should not be investing. I call them, "an investment." Also, a dollar of cash flow is worth more to me than a dollar of appreciation.

Real estate appreciates about 3% to 4.5% on average. It is not a steady increase and sometimes goes down. On most real estate there can be a positive cash flow. That cash flow is usually around 6% to 12%. To me a big positive to real estate is the ability to use leverage. If your cost of debt is 5% and you can cash flow at 8% you have a winner. The down side to me is that there is more involvement in real estate investing than in stock investing.

Stocks appreciate more than real estate because you are buying real, live business that hopefully are growing. Cash flow is usually lower than in real estate. Businesses usually have double digit returns on capital. Your ability to leverage is less (usually limited to 50%) and the cost is higher.

I invest in both and enjoy the process of investing in both. I know I didn't directly answer your question but I hope I helped you to frame the question a little differently.

Good Luck.

Bill

Originally posted by @Bill Jacobsen:


If you are counting the money you have to put up or expenses as a waste then you should not be investing. I call them, "an investment." Also, a dollar of cash flow is worth more to me than a dollar of appreciation.


Real estate appreciates about 3% to 4.5% on average. It is not a steady increase and sometimes goes down. On most real estate there can be a positive cash flow. That cash flow is usually around 6% to 12%. To me a big positive to real estate is the ability to use leverage. If your cost of debt is 5% and you can cash flow at 8% you have a winner. The down side to me is that there is more involvement in real estate investing than in stock investing.



Stocks appreciate more than real estate because you are buying real, live business that hopefully are growing. Cash flow is usually lower than in real estate. Businesses usually have double digit returns on capital. Your ability to leverage is less (usually limited to 50%) and the cost is higher.



I invest in both and enjoy the process of investing in both. I know I didn't directly answer your question but I hope I helped you to frame the question a little differently.



Good Luck.



Bill


 

well said! I day trade as well, and would like to add that I will never own a condo again. Not enough control for me

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.