Should I buy this condo all-cash (numbers in thread)?

Question

So what triggered this thought in me is that I really think the stock market is overvalued
* Cyclically adjusted PE ratio (valuations) are 2nd highest historically, #1 was the dot com bust. It took ten years for stock market to recover from that crash.

* Lots of people now are calling out the AI bubble, including Larry Ellison (founder of Oracle) and Bill Gates. I personally think its a bubble. Just a few days ago JPMorgan came out with a report pointing out that the billions in new profit that needs to be generated from the fortune being invested in new AI.

My thoughts is to take some off the top, transfer money out of the stock market and buy a condo all cash.

$150k studio, needs approx $10k rehabbing. $1500 rent, $460 HOA fee, $1300 annual taxes. Apartment manager says theres a waiting list for people looking to rent.

So let's say $750 monthly rental profit. That's 5.6% yield. Also got depreciation tax benefits. 2% appreciation and we're already close to stock market returns.

With retirement planning, it's generally held that a 4% safe withdrawal rate from stock market holding.

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So basically for a $160k all cash investment in a condo, I can get $750 month. If that's in the stock market, financial experts say that to be $500/mo.

Stock market of course is liquid but I'll keep multiple six figs liquid just for safety.

In a recession I'd sleep much better at night collecting monthly rent rather than have terrors about the stock market.

Adam Bartomeo · Answer

I would advise staying away from condos unless they are in some magical place. they are normally terrible investments.

Rob Howard · Answer

@Joe Villeneuve good points. I was writing from a Knoxville point of view. We're not looking at anything stagnant or losing equity without an insurable event. Sorry - not everywhere is like here - $160k doesn't get anything.

Joe Villeneuve · Answer

Regardless of the stock market, this is a simple math problem.

$160k in cash is your cost, around $11k CF/year means it will take you almost 15 years, not counting added cash costs along the way, before you recover your $160k cost.  That's terrible.

Rob Howard · Answer

@Joe Villeneuve except that he can sell it at any time probably for a profit in addition to the cash flow.

Jules Aton · Answer

I have thought the stock market has been overvalued since the pandemic but thankful I didn’t attempt to market time or it would have cost me a lot of money. What does your financial plan say? If this is in keeping with your asset allocation structure and you are heavier in the market than your plan outlines I think RE can be an excellent bond type fund component. Like you noted consider that it’s not liquid, requires babysitting and also that vacancies eat into your anticipated cash flow quickly. Despite owning a condo they are not what I generally recommend due to fees and likely abundant supply when it comes to resale and renting.

Elealeh Fulmaran · Answer

Your logic is solid to prefer sleep-at-night cash flow, but tighten the underwriting before you move: verify true market rent, vacancy, PM fee, insurance, utilities, and HOA reserves; HOAs can spike assessments and cap rentals, so read minutes and rules. Compare that condo’s net to a similar-priced SF home or small duplex with no HOA to see which yields better and is easier to finance later. If you do buy all cash, keep rehab light, build a CapEx reserve, and have a clear exit or refi plan; if the deal only pencils with perfect rent and zero surprises, keep shopping.

Denise Supplee · Answer

I agree the stock market feels stretched right now, and if you’ve already got liquidity covered, shifting some capital into a tangible, cash-flowing asset can be a smart move. Even if appreciation is modest, consistent rent plus tax benefits can outpace what a volatile market offers, especially if you value peace of mind in a downturn. At the same time, keeping a mix of different asset types is key; real diversification is the best hedge against whatever the economy throws at us. That's why I do what I do.

Should I buy this condo all-cash (numbers in thread)?

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