Any investors having success with renting low cost condos in DFW?

[Zane Zeigler]

I have come across an off market deal for a condo in Dallas, TX near Love Field. It would cash flow great but would probably be considered class C housing. Anyone having success in the Dallas market with this type of property?

[Andrew Postell]

@Zane Zeigler condos are very tricky.  VERY tricky.  And so is the definition of "low cost".  I'll define "low cost" as a condo $100k or lower.  

The first thing I would say is - sure, they cash flow if you buy all cash.  However, if you don't have all cash to purchase a condo.....and frankly if you did, there are other properties with better returns....then you would need a loan.  And getting a loan on a low value condo is the hard part.

Most traditional loans will require the condo to be "warrantable".  Without spending 30 minutes defining what warrantable is I'll just cut to the chase - I have not seen any low valued condo in our market be warrantable.

So that leaves you needing a "commercial" or "portfolio" loan to get on a condo.  Most of these loans will have higher rates and require the condo to cash flow.  However, most have a loan minimum of $75,000.  So in order for the condo to cash flow, you would have to put 30% down.  And putting 30% down on a $100k condo means you won't meet their loan minimum.

And that's why it's nearly impossible to invest at a healthy margin in "low cost" condos in the Dallas Fort Worth Arlington market.   I shortened this WAY down just to make it to the point so feel free to ask questions if you need.  Thanks!