Need Advice On Buying Preconstruction Condo - Hold And Rent Or Flip?
Hi Everyone,
I am interested in buying an oceanfront preconstruction condo. The preconstruction price is $179,900. Based on the current stats for similar condos in this area, the re-sale value could go up to $235,000 upon completion. I would like to flip this property but if I have to close on it, I just need to be sure it is a good investment. I would have to put 10% down. I was told that for this type of unit, I could generate rents of approx $15K - $25K per year. The monthly condo fees are $350. per month, which include utilities (not phone) and insurance.
Based on this info, would this be a good investment to rent or flip? Please advise!
The answer depends on your investing goals. If you are looking for appreciation and tax benefits, holding is great, plus you can use your oceanfront condo for a couple weeks vacation each year and even rent it to family/friends on the side. But be prepared for repairs, vacancies, increased condo fees, taxes, etc. Based on your numbers, you probably won't be cashflow positive, at the rental income you expect, so you need to be ready to pay some each month.
However, many of us would gladly flip the contract before closing for $15-25K. Your buyer gets a $235K property for around $200K, and you get cash today. You might get even more, but you'll probably have to close and then resell, which means double closing costs.
Check to see if your builder's contract is assignable. Many are not. You may be able to amend it by giving the builder a couple grand extra.
Good luck
Peter
You may also want to check into any restrictions that limit your ability to sell the property within a certain period of time. This is sometimes done so that you are not competing with the builder's spec homes.
I'm not sure what this is called or where to check it out at, but it is definatly something worth researching.
More than likely the builder is not going to allow you to assign your contract to another buyer at a higher price. There may even be a clause that states that you must owner-occupy the property for a certain period of time, so check for this. Why would you need to put 10% down? If you qualify for 100% financing use this instead. Then when you flip it your only costs will be the closing costs of the loan and selling commission. This way gives you higher leverage and return on your out of pocket expenses.
Thanks for all the great input. How does one go about qualifying for 100% financing on a project like this?