Are one bedroom condos bad investments in los angeles

[DowntownVentura]

Originally Posted by JohnG72

Can't deduct the interest from mortgage on a rental property. There are other deductions, but those may not exceed the amount of the standard deduction, particularly if OP doesn't own any other property.

Page 2, section titled "Qualified Home".

http://www.irs.gov/pub/irs-pdf/p936.pdf

Not that it matters to the OP's situation but just to clarify, you can indeed deduct interest on income property. It is on a different form (Schedule E, Line 12). It is applied differently. More info http://www.irs.gov/pub/irs-pdf/p527.pdf

Also, did you know that Schedule E losses are applied before AGI, meaning they are an acceptable AMT deduction? And losses includes depreciation, which is a cost basis deduction but not an "out of pocket" expense. You can finish a year making with a profit but still have a loss as far as taxes go. I do most years! The depreciation has to be recaptured at some point.

Originally Posted by JohnG72

I would contend that there is not one single one bedroom condo for sale on the westside where you can put 20% down and come out cash flow positive after factoring in mortgage and HOA.

Oh really?

[redturtle]

1 bdr condos are easier to sell and/or rent (if you decide to move out years later but not sell yet) in neighborhoods with a higher single or young population, usually in more densely populated neighborhoods - this goes for any major city.

In the LA area, it's less to do with specific neighborhoods, and more with specific streets/subsections within a neighborhood that has a more "urban" feel that attracts young, single folks (i.e. college students, young professionals, etc.).

Difference b/w 1 bdr and 2 bdr condos though is that 2 bdr condos generally are a little easier to sell (i.e. they don't stay on the market as long) because they attract a larger range of buyers: 2 bdr tend to be more attractive to couples and singles who can afford a 2 bdr. So even in a young, urban, densely populated street/neighborhood, a 2 bdr will be easier to sell.

In any case, if you're looking to buy, expect to hold onto it for at least 5-7 years for it to be financially worthwhile -- that was the rule of thumb used prior to the bubble (i.e. pre-2001), and you can use it now too. Again your life may change and you need to move before (starting a family, job overseas, etc.) so you may end up renting it out once you move out.