I'm struggling with an internal debate on paying all cash on a condo investment property and am open to any thoughts on the matter. I own a couple SFH rentals and I'm looking to buy two more properties this year. In the past I've ONLY looked at SFH rental as they tend to appreciate better than condos and will rebound quicker than condos. The problem now is that decent priced homes are very difficult to come by in my area. Almost all foreclosed homes take multiple over list price bids (even the wrecks). I've been sitting around with cash and can't spend it.
I'm a Realtor and have recently been working with a client who has bought 3 foreclosed condos through me (in the last two weeks!). The stream of condo foreclosures has remained strong although investors are out in full force now and starting to bid up the prices like we've seen with the SFH market. Rental rates for the place I want to buy are solid ($1,100 K a month on a $50K condo- Assessemts & Taxes are about $450/mo). Here is my two part dilema:
- I love leveraging the banks money but on a $50K condo I will need to pay all cash (since I can't get a loan for such a small amount). I feel like I'm "forcing" equity which I've never done in the past (because I've bought $200K SFH's with 20% down).
- I only have $80K I feel comfortable investing this year so taking $50K out of circulation to pay cash on this deal would leave me with only a $30K downpayment for a leveraged SFH (basically a $150K house which would be hard to find).
I'm having a hard time settling for a condo because of my fear they will lag in appreciation and not be as good a long term investment compared to the SFH. The condo would pay for itself in 9 years which I guess would be nice, but I hate not being able to leverage my money and tying it up in a condo. My gut says just keep waiting for a house but based on what all the investors are doing in my area, the money flowing to condos has me seriously considering it (I have one lined up to buy today). Anyone have experience with Condo investments and any insight on your thought process when buying as a rental?