Buy local condo for LTR or second/vacation home for STR

Buy local condo for LTR or second/vacation home for STR

Member since 2020 · 52 posts · 14 votes

I've been trying to make a move for a few years, and I'm finally getting ready to pull the trigger.

I'm based in CA (Palm Desert area) and I've considered 3 options.

1) A condo in Palm Desert (10min drive) -- I have my eyes set to a community of 2bd/1bath townhomes, where they sell for about 240k, with about $400 HOA. With 20% down, my monthly costs for the loan, insurance, and tax for the condo would be about $1900.

I would manage a long term tenant.

These should rent fairly easily for $1800 - they're typically listed for $1800-2000, and they're in a great location, one of the cheapest options around, and zoned for a great school.

2) A small house in Big Bear (2.5hr drive). This would be at around 350k. With 20% down my monthly costs for loan, tax, insurance would be about $2,250.

I would use a PM company to do Airbnb. I could be wrong on this one, but I believe this could rent for an average of $2000 per month, after PM commission.

3) Out of state C Class house (ie. Memphis). This would be through a turnkey company for about 110k, renting at 950/month, so the numbers are so much better, but way less appreciation and potentially bad tenants.

I'm looking for stability and long term growth. I'm leaning towards buying the condo.

I would love to hear your thoughts on the above and specifically to share any advice for me in terms of saving as much money upfront (ie. it would be great if I could buy with a smaller downpayment), or also things to consider as a first time landlord.

If I can buy that condo and come close to breaking even (or have a negative cashflow of 100-200$ per month) then I'll be a very happy man. But is that realistic?

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Jules Aton
MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
1y
1. I'm unclear why you would want a condo that would cost you money and is near your home so I'm guessing no perks of using as a vacation property for yourself? It sounds super cheap for CA and great school districts always grab my attention. Condos can come with negatives including fees, restrictions, supply/demand when you attempt to sell and only 1 bathroom is a negative.
2. The house might be a good investment but you would need to vet the actual numbers.
3. I'm generally not a fan of long distance investment rentals although I understand I'm the minority here. That said a class C property anywhere isn't what I would consider investing in but again that is a personal thing.
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- Rafael Ro
  OP
  Member since 2020 · 52 posts · 14 votes
  1y
  Quote from @Jules Aton:
  
  1. I'm unclear why you would want a condo that would cost you money and is near your home so I'm guessing no perks of using as a vacation property for yourself? It sounds super cheap for CA and great school districts always grab my attention. Condos can come with negatives including fees, restrictions, supply/demand when you attempt to sell and only 1 bathroom is a negative.
  2. The house might be a good investment but you would need to vet the actual numbers.
  3. I'm generally not a fan of long distance investment rentals although I understand I'm the minority here. That said a class C property anywhere isn't what I would consider investing in but again that is a personal thing.
  1) There are more details here, but the main thing is that these condos are the best cost vs rent I've found in the area, and even if I'm out a couple of hundred per month, I'd still (in theory) have a tenant paying off my property. I'd be able to screen the tenants myself, and keep an eye on the property too. Then I'd save money from taxes and mayyyybe one or both of my kids could go to the school too.
  
  2) I love the idea of having a vacation home, and I could get a better rate for that too. My concern is that I wouldn't be able to see it, and that I don't fully understand Airbnb... Regulations and such are scary. I don't think the Big Bear house would rent long term easily. Plus there is a ton of competition. In other words I see a lot of uncertainty with that plan, compared to the condo.
  
  3) This one I think pencils out the best, and would let me scale the fastest too... But too many variables.
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Arman AhmedPro Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 921 votes
1y
@Rafael Ro
Rafael — the condo seems like the most stable play since you’re local, it’s in a good school district, and you’ll likely see appreciation even if cash flow is slightly negative. Big Bear can work but STRs are riskier with seasonality and regulation. The turnkey in Memphis looks good on paper, but from my investing experience in the Midwest, tenant quality and management can make or break you. If you can get in with low reserves and break even, the condo looks like a smart first step.

[email protected]614-418-6081
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- Rafael Ro
  OP
  Member since 2020 · 52 posts · 14 votes
  1y
  Quote from @Arman Ahmed:
  
  @Rafael Ro
  Rafael — the condo seems like the most stable play since you’re local, it’s in a good school district, and you’ll likely see appreciation even if cash flow is slightly negative. Big Bear can work but STRs are riskier with seasonality and regulation. The turnkey in Memphis looks good on paper, but from my investing experience in the Midwest, tenant quality and management can make or break you. If you can get in with low reserves and break even, the condo looks like a smart first step.
  
  Thank you! That's how I feel about it too. My only small concern is that I've never done it before and I don't know what to expect. Plus we're in CA which is so very tenant friendly... Any advice?
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