Which is better investment property? 3br house or TWO 2br condo?

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NiLR3M said:   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

This is a great example of the kind of homework you need to do yourself. There's no way anyone here can advise you which property to buy without a lot more information (though SIS is as usual right-on with the 1% rule)

How sought after is the area for renters? What's the going rent? What are the management/HOA fees? What's the condition of both properties?

You answer questions like these by researching on Craigslist and local sites where people actually look for apartments to rent...not on Zillow. You might go to a few rental open houses yourself and see what is being offered. If this all sounds like too much work -- then don't become a landlord!

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???

Holy hell how does someone this financially illiterate have $400k to burn? In the long run, stocks are a great investment, most likely better than real estate. Just bc you lost money once doesn't mean you should never take any risk. Over any 20 year period, stocks have never lost money. Just buy an SP500 index and close thread. Unless you want to become a landlord and deal with the work associated with that.

dbl118 said:   
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. ...
It didn't stop OP, as most people, from investing in Stocks... why should it stop OP from a RE Investment.

dcwilbur said:   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.

Yes, that is net after mortgage, HOA, and tax. My reasoning is that will be almost fix 5.5% every year where stock/mutual funds have up and down year. After 30 years of mortgage later, it's straight profit. I already maxed out in 401k, roth ira. I figure this would be my form of diversification. I'm not sure what is smarter things to do...maybe buy personal mututal fund?

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.

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