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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75611  
Subject: Re: Smart idea or Not? Date: 7/17/2012 12:02 PM
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FWIW we looked at buying a place in South Florida about 18 months ago. We are about 8 years from both retiring and thought to rent it.

After 20% down and a very hard look at average occupancy rates, upkeep, sometimes community fees, and other expenses it turned out to have about a 3.5% return on the money invested.

Now, it could appreciate in value, or 18 months ago it probably depreciated a little from what we looked at. We had worries for condo's of community association's going bankrupt because of foreclosures and problems of tenants who might not stay (since this is a distance from where we live). Then again I'm not sure we'd want to live in THAT particular property in 8 years, OR, given grandchildren and children, that we'd still be interested at all in the area.

As a TIP-like investment 3.5% was good use of cash with the assumption that there will be appreciation in properties, you are appreciating a leveraged investment (unless you live in it forever), and some guess that rents will go up too. It also gave us an asset that probably appreciated along with the overall community in which we think we want to live, thus insuring that we could afford the market.

What will stocks do? I've pessimistic the next three to four years, but they "should" outperform over 8-10. But that's a risk too.

The negative possibility of bad tenants sometime in 8-10 years and the time or money it takes to manage one property from a distance eventually made me pass.

But for me it was close. Be very thorough in your financial due diligence.

Hockeypop
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