A customer looking for a starting investment property emailed me. She had seen a company bulletin for sale by owner real estate investment opportunity. Here's an edited version of the ad.
Town North of Boston - Cash Flowing Investment Condo – Renovated in Feb 2011. Rented at $1,250 per month. Great tenants. After property tax and condo fee, nets approx $xx,xxx per year. For sale, cash only, for 105k. That means cap rate of over 10%. Great deal for a self-direct IRA.
2 bedroom, 1.5 baths. So I looked up the address. the Seller had bought a foreclosure 1 year before for $75,000 in a 4 unit building with one owner occupant. No Fannie Mae approval in a building where there is a majority of renters. No mortgage possible. So you buy the condo for cash, and then you have a place you can't sell.
Condo's where there are a majority of renters have all kinds of bad things happen: landlords who don't pay their condo fees leads to poor maintenance leads to tenants who violate rules and regulations ..... A real downward spiral for the condominium complex.
And, you can make any investment work if there is no mortgage. The return on investment calculations are meaningless. Of course the return on investment looks good when there is no mortgage.
