Buy and Hold rental investment analysis

4 Replies

I am new to bigger pockets. I have a Phoenix short sale condo rental I have been in the works to buy since February and would like some feedback on the investment thesis.

I am planning on paying off the condo through additional principal payments to have it as a long term rental property to help support a financial independence plan.

The condo unit is 2br/2ba, 15 years old, and is located in a desirable area with luxury amenities. It has a significant HOA fee, but includes all exterior building maintenance for the property which I really like from a future maintenance time/cost perspective.

I am putting 20-25% down. I am pretty confident on the numbers included in the picture below. The analysis shows a negative cash flow which I am ok with due to the long term nature of the investment. I suspect it may be break even on cash flow because of my repairs and vacancy numbers are conservative.

I would personally pass on that deal. 

You really must look into the HOA budget and see how much reserves they have. If their expense is close to their income, when it comes time to redo the roof, they will hit you with an special assessment (extra payment) to fund it. On top of that, you have no say on how, when the work will be done. Part of owning real estate is being on the driver side, making decisions, finding a better deal for capital expenses, and if HOA will go with 3 offers and pick the cheapest, you are opening up for a big risk.

Also, you didnt budget for property management. You should always do.

Here is a analysis of a deal that isnt the greatest but we bought it:

https://www.dropbox.com/sh/5ym3bs2eyj372sw/AACKo9g1JwtDjXonPlNXT85ta?dl=0

Also,

Markets are very regional and different. Even two different neighborhoods in the same town will have different numbers. 

Ya id pass. If you said you were making $200 a month after expenses, i still might pass but you're doing a 30 yr fixed and losing money every month. By the time its paid off, you will have paid over 320k for the property. If you were doing a 15 yr fixed and breaking even, that MIGHT be worth it, but unless that place appreciates substantially, you're going to have a hard time getting your money back. 

Where is this condo? Have you considered converting to a vacation rental?

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