Are two better than one?
Are two better than one?
As with most answers to these types of questions, it’s a big Maybe. It all depends on the context of the person and the place. Let’s say that you have approx. $300,000 in financing available. You or your parent have met with their bank or mortgage consultant and have been pre-qualified based on credit and income. The conventional next step would be to begin searching for your home or condo that can be acquired for what you have been approved for, right? However, that’s only one possibility. Another option might be to instead look for two possibilities that would get you to the same value.
For example, instead of purchasing one home at $300,000 let’s say you bought two condos at $150,000 each. You might not end up with a home that is as big and nice as you were hoping for, but what do you end up with?
The pros are as follows
First of all, you have spread out your risk base. Some neighborhoods do better than others and particularly in campus area real estate, some properties pass from being the cool place to live into being yesterday’s news. Secondly, if you end up renting the property out as an investor, you have also reduced your exposure from a single tenant to multiple tenants. It will be easier to keep two smaller units occupied than it might be to keep one larger. Also, if you are unable to find a tenant for one of the two units, you will at least be at 50% occupancy. With one unit, it’s all or nothing!
There are the cons as well
It will most certainly mean more work as you have doubled your management obligations from one to two properties. It could double your maintenance calls, with two properties comes two kitchens, two HVAC systems and generally two sets of tenants to keep happy.
If you’re in the market for a campus area property, run the numbers. You might find that in the end, two ARE better than one!