Which Investment to Choose?

Question

We can't decide which option is more beneficial.

I have $300k to invest in a rental property.  I would like to buy a single family home in either East Long Beach (3 bed, 2 bath) or in Rossmoor (Orange County - 3 bed, 2 bath).

Option 1: Purchase a 3 bed, 2 bath in East Long Beach for approximately $600k - $650k that would rent for $3000-$3200 mo.

or

Option 2: Purchase a 3 bed, 2 bath in Rossmoor for approximately $800k - $850k that would rent for $4000-$4200mo.

Our goal would be to pay of the property and use the rent as an income source for retirement or before if we can pay it off sooner.  We want to buy and hold -- not flip or sell within a few years.  We are having a hard time deciding which is a better route.  Any input would be appreciated.

Ronin Crimmons · Answer

Hi Suzanne,

Thank you for your reply.  Both rental markets are high in demand with very low vacancy rates.  We currently own a similar property in East Long Beach and been vacant only 1 week in 3 years. I will try your recommendation of using the investment calculator.

Suzanne Griffiths · Answer

HI @Ronin Crimmons Have you run either or both options through the rental calculator here on BP?  I think that would give you a good start.  Unfortunately I don't know your market well so I can't give you any specific advise but, if you do both scenarios in the calculator it will show you what your cash flow will be after expenses and your mortgage.  Then consider the demand for rentals in both areas and potential vacancy rates etc.