• Go to page :
  • 1 2
  • Text Only
Voting History
rated:
Hello FWF. I'm not expert on property stuff. I was wondering if you guys can help me decide?

I can afford to buy 1 single 3br $400k house (with 200k loan) or get TWO 2br $200k condos (with 100k loan for each).

What would you do? Which is easier for me to find renters? 2br or 3br? Which will have less troubles and headaches? Which will likely have renters staying longer? Thanks.


Other info:
I'm in Southern California and already own a house.

Zillow estimate I can rent out $400k home at about $2200-2350/month. One of the homes I checked out has tentant living there renting at $2100.

Zillow estimate the $200k condo can be rent out at $1450. One of the gated condos built in 90s I checked out has tenant living there at $1400, HOA @ $310/mo

Member Summary
Most Recent Posts
It didn't stop OP, as most people, from investing in Stocks... why should it stop OP from a RE Investment.

JaxFL (Jan. 26, 2013 @ 7:10a) |

Yes, that is net after mortgage, HOA, and tax. My reasoning is that will be almost fix 5.5% every year where stock/mutu... (more)

NiLR3M (Jan. 26, 2013 @ 2:11p) |

That's what I was thinking too.

NiLR3M (Jan. 26, 2013 @ 2:12p) |

  • Also categorized in:
Thanks for visiting FatWallet.com. Join for free to remove this ad.

Can you get $4000 rent from the house or $2000 rent from each condo?

That's the rough 1% rule of thumb when deciding if a property makes for a good investment

If not then pass

Are the two condos in the same development? Don't forget to factor in association fees for the condos. You really just have to estimate your net ROI for both scenarios and go from there. Don't make an appreciation assumption. Calculate only a cash flow ROI.

What is this like a riddle.

Id buy 3 single family homes or 4 condos.

Figure out how and why, and maybe you'll agree. Not going to answer your questions, as they may be the wrong questions, and certainly need additional info.

I'm aware of several condo/townhome developments where several units are in foreclosure. The owners can't make their payments, let alone pay their maintenance fees. So, either the property isn't being maintained, or the fees for the other members have been increased to make up the difference (or assessments have been leveled against all owners). For that reason, I would be very cautious before investing in a condo.

If you have $200k to put down it seems silly to me to pay down 50% of any mortgage. Can you leverage it better and make more $$?

If you buy a 4 flat and move in to one of the units you could get likely get a loan with only 3.5% down and free up quite a bit of cash.

Why do you invest in real estate ? Do you understand that you are also buying a part time job (at least if you want to make more money and not outsource repairs) ? As SIS already stated did you do the math to make sure you get a positive cash flow and the investment can stand on its own ?

I hope you are not basing your decision on appreciation, this is not 2006 anymore.

I think you need to answer those (and probably a couple more) question first. Also you want to buy more leveraged and not pay 50% down.

NiLR3M said:   I can afford to buy 1 single 3br $400k house (with 200k loan) or get TWO 2br $200k condos where one is paid off and the other is not.Neither would be a good investment decision in most cases. I would not put $200k down on $400k of real estate. OPM.

Condos are like cars--they depreciate. Can stretch useful life by maintaining. (The opposite of having renters.) Even Donald Trump lost (big) on some of his projects and personal "investments."

I'd say buy the house, but echoing what others have said, why put so much down? Interest rates are so low these days. There are probably better places where you could put that money.

Some other minor considerations that you may want to weigh:
--Would the house entail yard/outside work or other factors that may create more work for you?
--You'd have to deal with two tenants with the condo instead of one with the house.

snork615 said:   Condos are like cars--they depreciate. Can stretch useful life by maintaining. (The opposite of having renters.) Even Donald Trump lost (big) on some of his projects and personal "investments."

I have yet to hear about a successful donald trump investment.

The guy is a media personality. He really isn't a good businessman from what I have heard. Anyways using him as an example of why something might fail isn't very good because he fails at most things he does.

Will the condo Association allow you to rent? Some condos do not allow the owners to rent.

Also what part of the country?

Most important: Are there Mason's on the condo board?

snork615 said:   Condos are like cars--they depreciate.

Ummm...condos follow housing prices. I bought condos in the 1980s for $80k, then sold them in 2005 for $250k. I think you are referring to mobile homes!!

I am all for building my own empire. As a result I love the idea of 2 condo's however I keep thinking why not buy one condo for $200k and save the other $200k and invest in stuff like stocks, bonds, options etc? Why put all $400k into real estate?

as others have said, you need to factor in HOA and maintenance costs plus what rentals go for in the area

As for HOA which covers exterior building and ground maintenance as well as insuring the building exterior, don't forget that you have to spend money on these things anyway when you own a house. Also, the HOA covers amenities such as pool, gym, etc. Whereas if you were to buy a house, it probably lacks pool, and thus lack appeal to potential renters. HOA is not such a bad deal as long as you buy condos in a complex that has minimal foreclosure.

snork615 said:   Condos are like cars--they depreciate. Can stretch useful life by maintaining. (The opposite of having renters.) Even Donald Trump lost (big) on some of his projects and personal "investments."Worst. Analogy. Ever.

No mention of the amount of rent for each option. That plus any differences in costs are the primary consideration. While 2 properties helps protect against vacancy losses, mo tenants usually equals mo problems. In addition, tenants who can afford to rent a nice house are usually less trouble than those who rent a less expensive house or condo.

I think this is an interesting question,

All else equal, what are the pros and cons for renting out a 3br house vs a 2br condo?

Just a few thoughts off the top of my head, correct me if I'm wrong...
3br house: you'll probably be renting to a family with 2+ kids, so things like safety, school district, etc are more important to finding renters.
2br condo: you'll probably be renting to a young couple without kids, or maybe a couple friends living together, so things like nearby entertainment are more important to finding renters. Probably higher turnover than with a house.

My gf has 3 condos and profits get eaten up by HOA fees. Fees you'll pay every month even when it's not rented. One of them is $250 a month, couldn't imagine paying anybody $250 monthly.

In some parts of suburban Atlanta it's possible to his the 2% standard. There's lots of homes between 45-55K and rents range $900-$1000.

scripta said:   snork615 said:   Condos are like cars--they depreciate. Can stretch useful life by maintaining. (The opposite of having renters.) Even Donald Trump lost (big) on some of his projects and personal "investments."Worst. Analogy. Ever.

Agreed. A friend of mine bought his condo back in 1995 for $120k in NYC. Now worth almost $1mil.
But if he bought a car 18 years ago, probably worthless by now.

There's no need to bring in the lows and highs of RE market into this. Their price has nothing to do with depreciation.

The fact is that most cars depreciate and wear out *much* faster than most buildings, and on top of that they don't get a favorable tax treatment (unless used for business).

SUCKISSTAPLES said:   Can you get $4000 rent from the house or $2000 rent from each condo?

That's the rough 1% rule of thumb when deciding if a property makes for a good investment

If not then pass


Are you referring to net, monthly, or annually?

For 400k house, I probably can get net $6500/yr after tax, ins, lawnmowing
For $200k condo, I probably can get net $5500/yr after HOA, tax

yaijic said:   If you have $200k to put down it seems silly to me to pay down 50% of any mortgage. Can you leverage it better and make more $$?

If you buy a 4 flat and move in to one of the units you could get likely get a loan with only 3.5% down and free up quite a bit of cash.

Well, I'm not sure if my job can last for the next 10 years or I have to go look for job elsewhere. Also, I heard horror stories from leveraging where they lose many when they lose 1...and I don't know much about it so kinda scared. Is leveraging where you split your cash to down just enough (20%) to buy as many properties as you can?

GermanExpat said:   Why do you invest in real estate ? Do you understand that you are also buying a part time job (at least if you want to make more money and not outsource repairs) ? As SIS already stated did you do the math to make sure you get a positive cash flow and the investment can stand on its own ?

I hope you are not basing your decision on appreciation, this is not 2006 anymore.

I think you need to answer those (and probably a couple more) question first. Also you want to buy more leveraged and not pay 50% down.


Well, I thought RE maybe is an easier way to make money since interest is low and likely will increase later on. I lost $30K on stock before already so kinda not sure about stocks. What would you invest $200k on if RE is not best?

uutxs said:   Most important: Are there Mason's on the condo board?

...queue a black helicopter flying in...

We're everywhere.

gizmoduck said:   I think this is an interesting question,

All else equal, what are the pros and cons for renting out a 3br house vs a 2br condo?

Just a few thoughts off the top of my head, correct me if I'm wrong...
3br house: you'll probably be renting to a family with 2+ kids, so things like safety, school district, etc are more important to finding renters.
2br condo: you'll probably be renting to a young couple without kids, or maybe a couple friends living together, so things like nearby entertainment are more important to finding renters. Probably higher turnover than with a house.

Thanks. Do you know which bedroom numbers have more people looking (3 or 2)? I like less turnover, so I think I'm leaning more toward home now. Is it safe to assume the 3 br will cost more to repair or clean when tentant move out and may take longer to find renter?

yaijic said:   If you have $200k to put down it seems silly to me to pay down 50% of any mortgage. Can you leverage it better and make more $$?

If you buy a 4 flat and move in to one of the units you could get likely get a loan with only 3.5% down and free up quite a bit of cash.

It's hard to buy anything in Orange County with 3.5% down.

WhiteGuy said:   I am all for building my own empire. As a result I love the idea of 2 condo's however I keep thinking why not buy one condo for $200k and save the other $200k and invest in stuff like stocks, bonds, options etc? Why put all $400k into real estate?

I lost $30k in stocks before so kinda not sure about stocks. My current rationale is interest is low, lots of short sales, and RE should go back up within 20 years later. Stocks may on and off and not sure which stock will guaranteed an increase by 20th years later. That's why I'm thinking RE should do better by 20 years later???

NiLR3M said:   SUCKISSTAPLES said:   Can you get $4000 rent from the house or $2000 rent from each condo?

That's the rough 1% rule of thumb when deciding if a property makes for a good investment

If not then pass
Are you referring to net, monthly, or annually?

For 400k house, I probably can get net $6500 after tax, ins, lawnmowing
For $200k condo, I probably can get net $5500 after HOA, tax
Something is not right here. Are you saying you can buy a condo for $200k that rents for over $6,000 per month???

I'm guessing he is saying he makes $6500/yr profit on the house and $5500/yr on the house.
Nilr3m- SIS is referring to $4000/mo gross rental income.

NiLR3M said:   SUCKISSTAPLES said:   Can you get $4000 rent from the house or $2000 rent from each condo?

That's the rough 1% rule of thumb when deciding if a property makes for a good investment

If not then pass


Are you referring to net, monthly, or annually?

For 400k house, I probably can get net $6500 after tax, ins, lawnmowing
For $200k condo, I probably can get net $5500 after HOA, tax


I think you answered your own question, if you can net 11,000 per year on 2 condo's (if the $5500 was meant per condo). That would be an annual return of about 2.75%, + equity appreciation.

As for what type is more in demand, depends on the town, but if you go to http://www.city-data.com/ , you can see demographics per zip code, including rental percentages, etc, to make a more informed decision on what you think is your market. Guess the 2 bedroom condo is more for young couples in or just out of college, single females, older couples with no kids, or poorer families with 1-2 children.

This is the second thread recently that has equated positive monthly cash flow with "profit." I'm guessing there's no reserve for roof, HVAC, and other costly items, no allowance for vacancies, no allocation for regular maintenance, etc.


Also, if these condos really did net $11,000 per year, that would not be a 2.75% return. Remember, he was only putting down $200k. If the positive cash flow was after debt service, the return would be 5.5% (on his $200k investment). I surely wouldn't risk all that capital in real estate for that measly return.

I really hate to break it to you, but neither options are "good" real estate investments. A good investment would net you a MINIMUM of a 1% return. For example, if you purchase a $400,000 house, you should get ~ $4,000/per month in rent. You likely wont find that in Orange County. Some may feel that the POTENTIAL appreciation on the house makes it a good investment, but buyer beware. Property taxes, HOA's, etc will kill you in California. Google the term "special assessment" - this will happen to you with a condo - so be ready for that. The $300/month HOA dues wont cover anything major (roof, gates, paint, etc).

Special assessments on condos can be rough. Condo decides when these items ( ie new roof) need to be done. You have no control over the timing and can face a large bill. With a house, you can amend the schedule within reason.. For example, you may be able to stretch out a new roof for a few more years.

NiLR3M said:   WhiteGuy said:   I am all for building my own empire. As a result I love the idea of 2 condo's however I keep thinking why not buy one condo for $200k and save the other $200k and invest in stuff like stocks, bonds, options etc? Why put all $400k into real estate?

I lost $30k in stocks before so kinda not sure about stocks. My current rationale is interest is low, lots of short sales, and RE should go back up within 20 years later. Stocks may on and off and not sure which stock will guaranteed an increase by 20th years later. That's why I'm thinking RE should do better by 20 years later???


Don't invest in real estate. Based on your comment about losing 30k in stocks and being "kinda not sure" about them, I don't think you are knowledgable enough/mature enough to be dealing with investing in real estate. You lost 30K in stocks because you either panicked and left the market at the wrong time, or made wildly aggressive moves. I think you need to learn stability before you tackle this new world of real estate.

Don't forget about the tax advantage you get from depreciation of the condos.

Also, the two-condo option will allow you the luxury of liquidating *one* if the financial need arises. In this case, you'd still have an income stream from the second. Along these lines, you could move in if need be, or you could rent to family/friends, if they found themselves on hard times. The shorthand is that you will have more options with two units than one big one.

Offset this with the headache of being a landlord 2x instead of one. 2x the potential repair headaches, etc.

Me: If the monthly net is the same (after paying potential HOA, etc), I'd go with the condos. I like greater options it gives when life (and finances) throw a curve-ball.

MilleniumBuc said:   NiLR3M said:   SUCKISSTAPLES said:   Can you get $4000 rent from the house or $2000 rent from each condo?

That's the rough 1% rule of thumb when deciding if a property makes for a good investment

If not then pass


Are you referring to net, monthly, or annually?

For 400k house, I probably can get net $6500 after tax, ins, lawnmowing
For $200k condo, I probably can get net $5500 after HOA, tax


I think you answered your own question, if you can net 11,000 per year on 2 condo's (if the $5500 was meant per condo). That would be an annual return of about 2.75%, + equity appreciation.

As for what type is more in demand, depends on the town, but if you go to http://www.city-data.com/ , you can see demographics per zip code, including rental percentages, etc, to make a more informed decision on what you think is your market. Guess the 2 bedroom condo is more for young couples in or just out of college, single females, older couples with no kids, or poorer families with 1-2 children.


The 1% rule is per month. On the $400k house you should get at least $4k per month. Both options do not meet the standard by a long shot.

Skipping 5 Messages...
darrcook said:   Don't forget about the tax advantage you get from depreciation of the condos.

Also, the two-condo option will allow you the luxury of liquidating *one* if the financial need arises. In this case, you'd still have an income stream from the second. Along these lines, you could move in if need be, or you could rent to family/friends, if they found themselves on hard times. The shorthand is that you will have more options with two units than one big one.

Offset this with the headache of being a landlord 2x instead of one. 2x the potential repair headaches, etc.

Me: If the monthly net is the same (after paying potential HOA, etc), I'd go with the condos. I like greater options it gives when life (and finances) throw a curve-ball.


That's what I was thinking too.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014