What is the best size condo for investment?
You may already have an answer and mostly is one bedroom plus den or 2 bedrooms. You may think it gives you the best option to invest or rent. But you may think twice after you read this article.
The most common mistake happens when you think you will be live in your investment property. Many investors confuse their own preferences for what makes a good property with what criteria makes a good investment.
For the condominium you may want to invest in, you want to pick the smallest studio, the smallest one bedroom, the smallest 2 bedroom and there are 2 reasons to do that.
1- the smallest units produce the best cash flow
the rental units primarily determine by unit type not the square footage, but unit type determine by square footage not the unit type, and this is the enough reason to buy the smallest unit for each category to collect more cash flow.
2- the smallest units appreciate at the fastest rate
there is always a ceiling on the maximum amount a buyer will pay for given type unit, so buying the smallest cheapest unit of a given type will leave the most room for appreciation.
For example, over a five years period, a 700 square foot bought at 350 k, might appreciate at 400 k, which would represent the maximum price for 1 bedroom, and this would be a 14% increase in price. However, in the same building a 500 square foot 1 bedroom bought at 350K might appreciate to 350 K which would be below the maximum price for a 1 bedroom.
So, do not worry if your investment unit is small, you will never live in that unit. Stick to the fundamentals and you will not regret your decision in the long run.