Can you give me investment advice?

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TheCynicalWon
S Advice on real estate investment?
I live in a major college town in which real estate within walking distance of campus is very valuble. The housing slump does not have seem to hit this area very hard considering enrollment in school has not dropped. I have an opportunity to purchase a condo for 175K close to campus that will sell after construction for 200K (in a perfect world) and prop value (according to agent) is increasing 5% year. The problem I see is is that my mortgage with all included is about 1400/month and if I decided to move out I dont think I could ever get a tenant to pay 1400/month-perhaps 1000 at best in the near future. Is this still a good investment given the prop value increase or should I go for something further from campus at a lower price that I know would be able to rent for close to the mortgage should I decide to get something better in a few years for myself to move into?

As already stated, you can get 5% on a CD, or in a good money market or even (online bank) savings account right now.

The extra financial leverage provided by the mortgage you would take out to buy the condo means that you could see a higher return, but it also means that your risk is considerably greater (real estate doesn't *always* go up, even in areas that haven't been affected by the recent, much-hyped bubble).

My best advice... consider investing in real estate only when you can rent the place out and generate positive monthly cash flow... which you've indicated you can't.

Another way to look at it is this: if you could rent out your (owned) condo for $1000, then you could presumably choose to rent a place to live in while you're in school for the same amount. That means that while you're in school, you're going to spend an extra $400 per month or $4800 per year, for the potential to gain at most (because of maintenance/repair costs) ~$10,000 per year. When you leave school, you'll still be on the hook for the $4800 per year, and probably have higher maintenance and repair costs, and likely have some months when the unit is vacant (even more money out of your pocket).

Seems like you've actually thought it through yourself pretty well, and have a sense for the pros/cons (not enough pros).

Good luck with school!

5% a year? You can do that well with a CD and you don't need to fix the furnace on a CD.

I wouldn't do it, that's a LOT of money to tie up in something that will be requiring a lot of your time.

This has been answered pretty well; however, one thing that I would add is that you didn't mention if the 1400 includes property taxes. It probably does because that is pretty high interest rate if you don't have taxes and insurance being escrowed. The biggest downside to me is that you would have to become a land lord. If you aren't looking at doing this type of thing full time it can be A LOT more trouble than its worth. Plus you are still responsible for fixing anything that breaks in the condo. IMO residential real estate should be bought to live in.....its not much of an investment after all the true costs are considered