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Is it worthwhile to buy a condo for 270K in RBA and rent it for 1800/month?

By jasonring   Follow   Fri, 3 Aug 2012, 2:43pm   2,217 views   19 comments
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I saw a condo on the market which asks for 270k. The rent estimation is around 1800/month (from zillow).

If I put down 20% and get a 30 years loan (3.5%). HOA is about 350/month. The rental income seems to break even with expenses in price in 6% vacancy rate. Is it worthwhile to invest?

The wildcard of the investment is that the property may sell for more in next 5 years. But it can go down too, just like those who invest in 2006.

What do you think?

If you were to invest in rental market, what is the magic number you will look into? Return rate or the price appreciate/depreciate or cash flow?

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1. Patrick Follow Befriend (54) 5,185 threads 6,157 comments 46 male Menlo Park, CA Premium

   1   3:06pm Fri 3 Aug 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   No, it's not worthwhile: http://patrick.net/housing/calculator.php?uaddr=%2C+&rent=1%2C450&price=270%2C000 I reduced the rent to you by the HOA amount per month.

2. SFace Follow Befriend (2) 61 threads 1,301 comments Premium

   2   3:08pm Fri 3 Aug 2012   Share   Quote   Permalink   Like   Dislike   Protected   No, Unless it is a newer (2006 and newer) condo in Palo Alto, Sunnyvale, Mountain View or San Francisco, than yes. Don't use zillow rent, crosscheck with Craiglist and find a comparable. "If you were to invest in rental market, what is the magic number you will look into? Return rate or the price appreciate/depreciate or cash flow?" You got the right idea, the best yield is not the best investment. I would prefer the best location possible with an acceptable yield possible. 5% of 500K is $25K 10% of 100K is 10K. Both requires the same amount of work (1 tenant to deal with), but the former yields more money. The better location is almost always the better investment anyway.

3. Biff Baxter Follow Befriend 65 threads 188 comments

   3   4:33pm Fri 3 Aug 2012   Share   Quote   Permalink   Like (1)   Dislike   ? Rare Bird Alert Ritchie Bros. Auctioneers Relative Byte Address Ranger Body Armor Regents Bachelor Of Arts Royal Bhutan Army Redwood Bluegrass Associates Regional Brevet Administrator Refined Bitumen Association Radiological Buffer Area Richmond Baptist Association Red Blooded American Residence-Based Advising Reduced Bias Adjustment Rescue Breathing Apparatus Radar Beacon Acquisition Reservation-Based Algorithm Reentry Body Assembly Refined Born Approximation Repeat And Blockwise Accumulate Radio Base-Station Antenna Ready Basic Aircraft Request For Bid Approval Run Book Automation Risk Based Approach Results Based Accountability Rights-Based Approach Relative Binding Affinity Rochester Business Alliance Retail Bakers Of America Role-Based Architecture Rentable Building Area Resource Based Advantage Retailer's Bakery Association Reserve Bank Of Australia Revolution In Business Affairs Request For Board Action Richmond Baseball Association Royal Brunei Airlines Real Brushed Aluminum Reformed Blacks Of America Rules Based Automation Receptor Binding Assay Rehoboth Baptist Association Reimbursable Budget Authority River Basin Authority SFA Biff

4. justme Follow Befriend (2) 33 threads 3,458 comments

   4   4:50pm Fri 3 Aug 2012   Share   Quote   Permalink   Like   Dislike   RBA means "Real Bay Area", the expensive and central sections of the San Francisco Bay Area. Alternative definition: Any place in the SF Bay Area where prices "never" go down. Mathematically known as "the empty set". For a while used to be a steadily shrinking subset of the SF Bay Area.

5. iwog Follow Befriend (48) 273 threads 12,513 comments 47 male Lafayette, CA Premium

   5   7:46pm Fri 3 Aug 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   jasonring says I saw a condo on the market which asks for 270k. The rent estimation is around 1800/month This just makes me sad. I think I turned down about three Walnut Creek condos in the $130k-$150 range last year and ended up buying only one. The rest went back to the bank at foreclosure sale. They are all easy $1800 rentals now and the new ones coming on to the market in the same complex are getting well over $200k. Those of you who ridiculed potential buyers over the last 3 years for wanting to enter this market should be ashamed.

6. lonestarmike Follow Befriend 2 comments

   6   11:23pm Fri 3 Aug 2012   Share   Quote   Permalink   Like   Dislike   no - run. you want 1%-3% of sales price in gross monthly rent. depends on area --- older cities are providing opportunity. best - mike look for opportunity

7. lonestarmike Follow Befriend 2 comments

   7   11:23pm Fri 3 Aug 2012   Share   Quote   Permalink   Like   Dislike   ps f zillow

8. Goran_K Follow Befriend (4) 25 threads 1,517 comments Laguna Beach, CA Premium

   8   10:44am Sat 4 Aug 2012   Share   Quote   Permalink   Like (1)   Dislike   Protected   No, solid loser. At $175,000, maybe. I'd have to do the numbers.

9. thomaswong.1986 Follow Befriend 15 threads 2,838 comments

   9   1:51pm Sat 4 Aug 2012   Share   Quote   Permalink   Like   Dislike   jasonring says I saw a condo on the market which asks for 270k. 1997 prices plus inflation (35%) > 270K... NO! else if less than yes! Rents do fluctuate even on the downside !

10. REpro Follow Befriend (1) 22 threads 469 comments San Jose, CA

    10   4:41pm Sat 4 Aug 2012   Share   Quote   Permalink   Like   Dislike   If this condo is newer, well-built and trendy, p. price 220-240K may be considered.

11. wave9x Follow Befriend 4 threads 64 comments

    11   10:38am Sun 5 Aug 2012   Share   Quote   Permalink   Like   Dislike   You should buy this place. Your break even point will be less than 2 years if you use reasonable default values in your calculations. Do the math yourself, don't use biased rent-vs-buy calculator's like Patrick's. Here are some questionable default assumptions made by Patrick's calculator: -1% house price depreciation (yes, value decrease) yet a 3% ROI -only 1% rent inflation -5% interest rate, way higher than currently -25% income tax rate, way too low esp for CA and Bay Area -too high maintenance costs (he subtracted HOA from your rent amount yet includes it as a cost in his online calculator) -too high property taxes

12. David9 Follow Befriend (3) 28 threads 747 comments Tarzana, CA

    12   10:46am Sun 5 Aug 2012   Share   Quote   Permalink   Like   Dislike   Patrick says No, it's not worthwhile: Patrick's calculator hasn't been wrong here in LA. (Yes, an upscale open house I went too did sell for nearly the asking price as a realtor pointed out, but the calculator isn't a guage of if it will sell.. :) ) Have any Real Estate / Banking laws changed in the last 4 years? Is Fannie suddenly solvent? Have the hedge funds started renting out their bulk rentals THEY got for way less than 270K?

13. KILLERJANE Follow Befriend (3) 12 threads 600 comments

    13   10:47am Sun 5 Aug 2012   Share   Quote   Permalink   Like   Dislike   270,000 for 1800 rent is far shy of the 1% rule

14. bubblesitter Follow Befriend (5) 10 threads 2,329 comments

    14   1:49pm Mon 6 Aug 2012   Share   Quote   Permalink   Like   Dislike   Big question is,will it appreciate 2 to 3% a year for next 5 to 10 years? If the answer is NO then DON'T do it.

15. ohomen171 Follow Befriend (23) 90 threads 44 comments Pacifica, CA

    15   1:37am Mon 24 Sep 2012   Share   Quote   Permalink   Like   Dislike   I have owned a condo in San Jose for 6 years. I have seen it drop in value from $415,000 down to about $180,000. On the open market it would rent for over $1,600 per month. I can put it into Chapter 13 bankruptcy and get the loans down to the current value. I see appreciation starting to go up and the tax write offs are great. It still has potential. You have to look at yur total situation.

16. 37108605 Follow Befriend 1 threads 1,055 comments

    16   5:05am Mon 24 Sep 2012   Share   Quote   Permalink   Like   Dislike   jasonring says The rent estimation is around 1800/month (from zillow). Go to Detroit inner city and find a 35K place in a ghetto and see what they claim it CAN rent for and get back to me.

17. 37108605 Follow Befriend 1 threads 1,055 comments

    17   5:07am Mon 24 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   bubblesitter says Big question is,will it appreciate 2 to 3% a year for next 5 to 10 years? If the answer is NO then DON'T do it. DO YOUR MATH If you are waiting for that to happen on any real estate you have a long cold wait. You have the right icon. Btw I thought your name read bubbleshitter. Freudian?

18. 37108605 Follow Befriend 1 threads 1,055 comments

    18   5:08am Mon 24 Sep 2012   Share   Quote   Permalink   Like (2)   Dislike   David9 says Patrick says No, it's not worthwhile: Patrick's calculator hasn't been wrong here in LA. (Yes, an upscale open house I went too did sell for nearly the asking price as a realtor pointed out, but the calculator isn't a guage of if it will sell.. :) ) Have any Real Estate / Banking laws changed in the last 4 years? Is Fannie suddenly solvent? Have the hedge funds started renting out their bulk rentals THEY got for way less than 270K? Yes but what is upscale to one is not to another. And it sold for near asking? To whom? There is ALWAYS a story behind the story especially in LA. I don't see any of the 25M or more ridiculous 75M Malibu dreamers selling.

19. dhmartens Follow Befriend (1) 11 threads 50 comments Reseda, CA

    19   9:00am Mon 24 Sep 2012   Share   Quote   Permalink   Like (1)   Dislike   40 years from now will they be saying?, "Remember, Real estate only goes down"