Expect to pay up to 50% of income on expenses (property manager, maintenance, insurance, HOAs, vacancy, lease fee, advertising, some utilities, property tax).
Condo doesn’t need a property manager and if you pick the right one, maintenance is minimal. Insurance is mostly picked up by the HOA fee, landlord’s liability is cheap. What lease fee? What advertising? Craigslist is free, and I’ve never checked a tenant’s credit, just interviewed VERRRRRY carefully, asked for multiple references, checked them out online, and looked if the story made sense.[/quote]
The OP is not from the US. Would you dive into an RE investment in a foreign country? You need to understand eviction laws, how to deal with late payments, tenant and landlord rights and responsibilities, rent controls, liability issues, maintenance regulations (lead paint, asbestos and mold), background checks, credit checks, lease contracts, references, interviewing techniques. You need 24 hour contractors that you trust. It is time consuming, full of potential problems that can very quickly turn into a train wreck. A good property manager will do all this for you, and the costs I mention are relating to a managed property. You may be charged up to one months rent for a new lease.
Owning a condo is no different other than exterior maintenance and basic building insurance. You are, however, paying for that in HOA fees. You WILL need liability insurance.
There are a lot of part-time investors who have just one home they inherited or bought many years ago in their own backyard, where they know everyone and have had the same reliable tenant for years. The other side of RE investing can be very different. If you do your research, always expect the unexpected and prepare for the worst you’ll probably be OK. Rule one for me is always over-estimate the costs and I know many investors who use the 50% rule. That is conservative in my experience. Because it hasn’t happened to you doesn’t mean that it won’t happen, or happen to someone else.
