places where condos cash flow ??

Question

Was just talking to Brian about this topic, thought I would start a new thread.

Anyone has advice on places where condos cash flow well and may perhaps satisfy the 50% / 2% rule?

Chris Martin · Answer

Our modificaiton to the 2% rule that sets our target upper price limit is simply (expected rent - HOA fees) / 0.02 = upper price limit. So, for a $700 condo with $150 HOA fees, the price limit would be about $27,500. THis was feasible in my area in 2010-2012, but not sure about now (we aren't adding to this part (condo part) of the portfolio).

Account Closed · Answer

NYC condos can be cash flow, but will need 30% down and very strong lender relationships. You are looking for specific Manhattan Condo buildings with lower carrying costs that can be rented at decent rates.

I found 2-3 specific post-war buildings I like in Midtown that allow me to get around 6% ROE (after debt) which are finance-able with residential mortgages. CC+RETax has to be well under $2 psf and can get 6% ROE. I don't consider appreciation with my calculations but I do know for a fact that the properties have appreciated quite nicely since we bought them during the past recession.

Mary Joe · Answer

Hi Jerry, what you described are probably very selected few that is out of the norm (for whatever reasons).

Right now the average price per sq ft in NYC is $1000+ / sq ft.

A very basic  400 sq ft studio condo can easily go for $400K upward, and the market rent is approx $2200 per month.

Say if I put 30% down, my monthly mortgage (rough estimate) is probably about $1300 per month,  add another $800 (low estimate) for condo fees and ppty tax combined, that will be just about enough for me to break even at market rent of $2200 for studios.

That doesn't even include insurance and other costs that I will have to incur.

Can you name some of the buildings that can yield around 6% in NYC?  Would love to check them out...

thanks
MJ

Mary Joe · Answer

Thanks Ned.  From what I have seen so far, I believe it is more market specific than deal specific.

For example, in NYC, it is almost impossible to break even unless you have at least 40-50% down.

Jon Klaus · Answer

There are condos in Dallas that will rent for 2% of their purchase price. Not in the best areas, though.

Ned Carey · Answer

I suspect this is as much deal specific as it is market specific.  - Ned

places where condos cash flow ??

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