When buying for investment, the pundits say, "the profit must be made at the time of purchase". This means that if the property has to appreciate for it to be a good investment, then it is NOT a good investment. Therefore, make your decision based on these essential items:
1. Does it cash flow positive?
2. What is your return on investment assuming 0% appreciation? Is it greater than your other investment portfolios are earning?
3. Will the rents retire the mortgage debt in 7 - 10 years?
If you like the answer to the above questions then this is a great investment. Buy as many as you can that give you three YES answers.
That being said - here is my prediction about the market for downtown Long Beach Condos. Prices are NOT going up in the near future. In fact, we may see some price decreases if, or when, some of the HOAs have to declare bankruptcy or issue large assessments to get themselves back on track. This flat market will probably last at least through 2011, maybe even longer. Out about three years, you will probably start to see a general, although very gradual increase in prices. If interest rates rise into the 7 & 8% range (even though these are still very reasonable rates), the increase may be delayed, but certainly will be even more gradual. If you are looking to make a killing on this property based on a 5-7 year timeline on appreciation alone, you might be disappointed. Will you make a profit at sale? Probably, but not a killing.
Just remember, appreciation is not necessary to make a good investment good. Appreciation is like the icing on the cake, it will make the cake tastier, but a good cake can stand on its own. Make sure that you make investment decisions based on sound business principles and you will always come out a winner. Dare to Dream.
Shel-lee Davis, CDPE, SFR, QSC
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty