Considering Real Estate investment options, help me decide?
November 1, 2014 7:44 AM Subscribe
I'm considering buying residential property to rent out, either in Portland, ME or Orlando, FL. Quite different scenarios, so the decision isn't really apples-to-apples.
Background info: I've had good success buying a few residential properties, holding and renting them out. Weathered the recession without too much pain. Own condo and 2 houses in Orlando and one condo in Portland, ME (that one is owned outright, others have mortgages & 30-50% equity.) I'm single, 50 y.o., self employed, and on paper I don't show much income, but live comfortably. Originally RE investments were part of plan for retirement, now provide a (very) little monthly income too.
I realize there are many factors involved, and I can't provide every detail involved in this decision, but would be grateful for some opinions. I am considering buying another property in Portland - I love to visit often, enjoy being able to write off travel to attend to business and spend time with friends there. I lived there 20 years ago, and I may eventually live there again for at least part of the year. Looking at condos, because they're easier to manage in general, and because my upper limit is $150-175k.
I have also considered either a house or condo in Orlando. Many cheaper options, but a much different market for renting (lots of apartment complexes etc competing for tenants, neighborhoods change faster, many more foreclosures....) Property here would be easier to manage, possibly provide a little more cash flow, but likely not appreciate very quickly, and the properties I've considered might top out around $100k, so not likely to ever build equity like Portland. I expect to hold anything for at least 5 years and possibly up to 25+.
If I buy in Orlando, I will probably find something for under $75k, pay cash. If I buy in Portland I will have a 50% private mortgage at a somewhat higher rate than banks are offering, but would expect to pay it off within 2-4 years. (Traditional financing is not an option.) In the past I've bought good, non-distressed properties in good areas, done basic upgrades, and been able to maintain professional tenants, often young couples.
I know YANMBanker. But it might be a fun exercise to help me work through this.
Background info: I've had good success buying a few residential properties, holding and renting them out. Weathered the recession without too much pain. Own condo and 2 houses in Orlando and one condo in Portland, ME (that one is owned outright, others have mortgages & 30-50% equity.) I'm single, 50 y.o., self employed, and on paper I don't show much income, but live comfortably. Originally RE investments were part of plan for retirement, now provide a (very) little monthly income too.
I realize there are many factors involved, and I can't provide every detail involved in this decision, but would be grateful for some opinions. I am considering buying another property in Portland - I love to visit often, enjoy being able to write off travel to attend to business and spend time with friends there. I lived there 20 years ago, and I may eventually live there again for at least part of the year. Looking at condos, because they're easier to manage in general, and because my upper limit is $150-175k.
I have also considered either a house or condo in Orlando. Many cheaper options, but a much different market for renting (lots of apartment complexes etc competing for tenants, neighborhoods change faster, many more foreclosures....) Property here would be easier to manage, possibly provide a little more cash flow, but likely not appreciate very quickly, and the properties I've considered might top out around $100k, so not likely to ever build equity like Portland. I expect to hold anything for at least 5 years and possibly up to 25+.
If I buy in Orlando, I will probably find something for under $75k, pay cash. If I buy in Portland I will have a 50% private mortgage at a somewhat higher rate than banks are offering, but would expect to pay it off within 2-4 years. (Traditional financing is not an option.) In the past I've bought good, non-distressed properties in good areas, done basic upgrades, and been able to maintain professional tenants, often young couples.
I know YANMBanker. But it might be a fun exercise to help me work through this.
IMHO by owning one property in Portland you already have the tax-deductible reason to visit. It's easier to deal with property nearby, so I'd pick the Orlando option since it also offers better return. Use your borrowing capacity to buy two Orlando properties instead and spread your risk further. Baby boomers be retiring...
posted by carmicha at 8:20 AM on November 1, 2014 [2 favorites]
posted by carmicha at 8:20 AM on November 1, 2014 [2 favorites]
1 vote for Portland. Why? Diversification and I don't like Florida.
posted by Pembquist at 11:12 AM on November 1, 2014 [1 favorite]
posted by Pembquist at 11:12 AM on November 1, 2014 [1 favorite]
I lived there 20 years ago, and I may eventually live there again for at least part of the year.
Would it make sense to buy a property in Portland that you personally might like to live in, at least part of the year, at some point? If you are currently looking at laying the groundwork for returning to Portland, even if only part-time, this might be an opportunity to flesh that idea out a bit more and make it more feasible.
I also like the idea of diversifying your real estate portfolio and I would have some concerns about sinking too much money into Florida real estate. IIRC, Hurricane Andrew really hit Florida hard, so hard that it had serious impact on the insurance industry in America. I would be a bit nervous about the possibility of have so much money tied up in an investment that could be destroyed in one fell swoop.
Perhaps Orlando is not at high risk for such an event, but, some years back, I spent some time trying to figure out a 'safe' place to live and concluded that it is basically a case of "pick your poison." No matter where you live, there is some sort of natural disaster that can happen that can wipe out an entire city: Flood, hurricane, tornado, earthquake, fire, etc. Diversification is a hedge in case something happens in that particular market. I am pretty fiscally conservative, so that approach would appeal to me. (I realize that, as you stated in your ask, there may be other factors you haven't listed which could cause Orlando to win out. But, based on the info available to me, those are my thoughts.)
Best of luck.
posted by Michele in California at 2:33 PM on November 1, 2014 [1 favorite]
Would it make sense to buy a property in Portland that you personally might like to live in, at least part of the year, at some point? If you are currently looking at laying the groundwork for returning to Portland, even if only part-time, this might be an opportunity to flesh that idea out a bit more and make it more feasible.
I also like the idea of diversifying your real estate portfolio and I would have some concerns about sinking too much money into Florida real estate. IIRC, Hurricane Andrew really hit Florida hard, so hard that it had serious impact on the insurance industry in America. I would be a bit nervous about the possibility of have so much money tied up in an investment that could be destroyed in one fell swoop.
Perhaps Orlando is not at high risk for such an event, but, some years back, I spent some time trying to figure out a 'safe' place to live and concluded that it is basically a case of "pick your poison." No matter where you live, there is some sort of natural disaster that can happen that can wipe out an entire city: Flood, hurricane, tornado, earthquake, fire, etc. Diversification is a hedge in case something happens in that particular market. I am pretty fiscally conservative, so that approach would appeal to me. (I realize that, as you stated in your ask, there may be other factors you haven't listed which could cause Orlando to win out. But, based on the info available to me, those are my thoughts.)
Best of luck.
posted by Michele in California at 2:33 PM on November 1, 2014 [1 favorite]
Response by poster: It's a little hard to remain objective because I love Portland (except dead-of-winter weather) and I am not as fond of FL. I do look at every property as something I might live in someday, even if just short term. So yes, it might be a good opportunity to test the waters in that way. Managing a property 1500 miles away has been pretty easy. I have network of friends and tradespeople I can call when things come up.
Most things I've considered in FL need some work, or appliances, or *something* - easy stuff like paint I can do myself, but a FL property may require more time and or money before putting a tenant in. Properties in ME so far have been mostly turnkey. Luckily (knock wood) Orlando is less likely than many places in FL to be impacted by weather-related disasters.
posted by pinkbungalow at 2:53 PM on November 1, 2014
Most things I've considered in FL need some work, or appliances, or *something* - easy stuff like paint I can do myself, but a FL property may require more time and or money before putting a tenant in. Properties in ME so far have been mostly turnkey. Luckily (knock wood) Orlando is less likely than many places in FL to be impacted by weather-related disasters.
posted by pinkbungalow at 2:53 PM on November 1, 2014
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So there's my bias and with that I think Orlando (or perhaps Tampa area) are the better choice.
Good luck, sounds like a nice problem to have!!
posted by chasles at 8:08 AM on November 1, 2014 [1 favorite]