Ready to cash in on the condo craze? Not so fast. Three condo investing “myths” as dispelled by CNN/Money:
Myth 1: Get in early and you’ll be guaranteed a profit.
Remember the lust for Internet IPOs? Ordinary investors bid up the stocks of hot little companies that hadn’t even registered their first sale yet. Today’s version is a preconstruction condo…
Myth 2: Creative mortgages lower your payments and guarantee positive cash flow.
Whatever your choice…your expected rent should cover at least 70 percent of your total monthly costs. Tax write-offs on condo losses can help close some of that gap…(Up to $25,000 in losses, excluding mortgage-principal payments, can be charged against total income of less than $150,000.)
Myth 3: You should buy in your backyard, where you know the landscape.
To help you determine where to invest, take the average price at which units are selling in a city and divide it by the annual rent the average apartment there generates. That will produce a price-to-rent ratio. The lower the better. Houston, Atlanta and Philadelphia, for instance, still look relatively good, while New York City and San Francisco do not.
· The three myths of condo investing [CNN/Money]