Newly built, one is 1,700 sq. feet the other is 2,000, $140k & $155k (initial asking price while building was $180k and $205k). Includes first year HOA dues of $180/month. Near new high-end neighborhood, and I'm looking to find renters that are either not ready to purchase, can't purchase yet, or couldn't afford the home they were in.

What are some of the pro's and con's of investing in real estate property like this, and what would you recommend I consider during this process?

Thanks!

Muy

Muy, here are some things to consider.

Pros:
Real estate is probably the best investment out there. I especially like rentals because you get cashflow, the depreciation write off on your income taxes, appreciation (depending on the area), and someone else paying your mortgage down. The condo community tends to get taken care of better than apts. due to most people owning the property rather than renting.

Cons:
Being a landlord and dealing with tenants. Dealing with the condo association. While not always bad, they can enact rules that are unfavorable for landlords. Condos/townhomes tend to have a smaller buying audience so you may have a harder time reselling them.

Things to consider:
Be sure to read over the association rules very carefully to see what kind of restrictions, if any, they have regarding rental property.

Can you be a landlord? The question I was always asked when I started getting into this was, "Can you evict a single mom, with 2 kids, on Christmas Eve, during a snowstorm, if they haven't paid rent?" I know that's an extreme example, but the point is, being a good landlord and doing what's in your best interest as a property owner sometimes requires you to be the bad guy.

Can you function as a handyman? While it may be a beat down to have to go repair a toilet at 7pm on a Tuesday night, after a 10 hr. day at work, it sure beats paying a plumber $100 to do it.

Looking at the prices of the properties you are looking at, I'm not sure how easy it will be to find renters to cover the costs. Obviously, I don't know the neighborhood you are looking in, but the quick and dirty calculation is that your monthly cost = 1% of the purchase price. So the 140,000 property would cost you about 1400/month, meaning you need to find someone who will pay at least that amount in rent to break even. You'll also have to factor in the HOA dues at some point. Just make sure you check other rentals in the area to see if they support the rents you'll need to charge.

All great points that I am considering. Year 1 HOA dues are covered, but I have to plan for years 2 and beyond. I believe there isn't Homeowners insurance in this situation, but instead the HOA dues cover insurance.

These are a small pocket of Townhomes in a DR Horton community, where the house values are between $175k - $240k. It's in a growing exurbian area, and I'm looking at this as a 10-20 year investment.

I believe I'll be able to break even on my loan costs, and be responsible for repairs after year 1 (year 1 is all covered by the builder which is nice, since they are new).

The realtor I'm working with feels that we should be able to get minimum 1-2 year committments.

In the end, if I'm able to get at least 80% of the time covered by long-term renters, I hope to have some nice equity in 10-20 years, or even be able to provide my sons a starter place to live when they get out of college and need a place to live.

Something else that I would consider is the difference between your 155k townhome and these 175k houses. Is it substantial? Why would someone want to live in your townhome as opposed to the house around the corner?

dp

[This message has been edited by sterlicious (edited 2/2/2008 9:57a).]

Good luck, Muy. I have been looking into doing something similar, too. I need to get a few more bills paid off first, though.

horton is horrible!!!!!

what do you mean by that, topdog ? ? ?

I've sold a few Horton homes and the people I sold the homes to all love them.

[This message has been edited by Fort Worth Realtor (edited 2/2/2008 3:57p).]

Muy is this out in Frisco?

I would be a bit worried about townhouses in a exurban/suburban area. Those who are generally interested in such properties, are the under 35 set and emptynesters, both of those demographics are moving back into the city within walking distance of entertainment and shopping. If it is one of the many mixed use developments thats better (better yet one of the transit oriented centered around a DART station) but I think the manufactured town center will run its course.

My suggestion is to find similar townhouse/condo projects built in the inner ring burbs 20 yrs ago or so and see how they have fared.

I agree with the posters above, you are putting yourself in a lot of risk buy purchasing a single asset. If you are looking to be involved in real estate and want to have more of a hands on approach than what a REIT or large investment company offers check out www.d3re.com as it offers a good investment alternative. I can answer any questions you may have.

[This message has been edited by Up&ComingAg03 (edited 2/2/2008 6:18p).]

fw realtor I know builders very well. I will not sell a horton. you as a realtor should be weary of them contact me ill explain.

one other thing to think about in your budget, do the newly built ones have the HOA's setup or is the builder still running them? if the HOA is setup then make sure that the dues have been set and see look for their financials or what the dues go towards. We lived in a townhome and there were only 30% sold when we moved in and the HOA could not be formed till there were 70%. When that time came the HOA was formed and the dues went up 50% because they had to build up the slush fund. One thing to ask/check about.

teamtopdog, I sent you an email via your website.

Thanks!

Great points all. This is my first move into real estate investment, and being a fairly conservative person, I'm still hesitant to take the risk. If any of you in the business would like to discuss your services please let me know.

Muy, check out my company website www.d3re.com and you can contact me through that website, my name is Todd, or give me your e-mail on here and I will contact you. I think what I have created with my partners is ideal and was specifically created with people like you in mind, as I have several friends in the same boat.

Just emailed the address on your site Todd, I'm open at noon, if you have 15 minutes to chat.

Thanks