Should I start investing in property with $10,000 deposit and $35,000 annual wage
You want to buy a house for $150,000.  It may be possible to do this with $10,000 and a 3.5% downpayment, but it would be a lot better to have $40,000 and make a 20% downpayment.  That would give you a cushion in case house prices fall, and there are often advantages to a 20% downpayment (lower rate; less mandatory insurance).   You have an income of $35,000 and expenses of $23,000 (if you are careful with the money--what if you aren't?).  You should have savings of either $17,500 or $11,500 in case of emergencies.  Perhaps you simply weren't mentioning that.  Note that you also need at least $137 * 26 = $3562 more to cover mortgage payments, so $15,062 by the expenses standard.  This is in addition to the $40,000 for downpayment and closing costs.   What do you plan to do if there is a problem with the new house, e.g. you need a new roof?  Or smaller expenses like a new furnace or appliance?  A plumbing problem?  Damages from a storm?  What if the tenants' teenage child has a party and trashes the place?  What if your tenants stop paying rent but refuse to move out, trashing the place while being evicted?  Your emergency savings need to be able to cover those situations.   You checked comps (comparable properties).  Great!  But notice that you are looking at a one bathroom property for $150,000 and comparing to $180,000 houses.  Consider that you may not get the $235 for that house, which is cheaper.  Perhaps the rent for that house will only be $195 or less, because one bathroom doesn't really support three bedrooms of people.   While real estate can be part of a portfolio, balance would suggest that much more of your portfolio be in things like stocks and bonds.  What are you doing for retirement?  Are you maxing out any tax-advantaged options that you have available?  It might be better to do that before entering the real estate market.   I am a 23 year old Australian man with a degree in computer science and a steady job from home working as a web developer. I'm a bit unclear on this.  What makes the job steady?  Is it employment with a large company?  Are you self-employed with what has been a steady flow of customers?  Regardless of which it is, consider the possibility of a recession.  The company can lay you off (presumably you are at the bottom of the seniority).  The new customers may be reluctant to start new projects while their cash flow is restrained.  And your tenants may move out.  At the same time.  What will you do then?   A mortgage is an obligation.  You have to pay it regardless.  While currently flush, are you the kind of flush that can weather a major setback?  I would feel a lot better about an investment like this if you had $600,000 in savings and were using this as a complementary investment to broaden your portfolio.  Even if you had $60,000 in savings and would still have substantial savings after the purchase.  This feels more like you are trying to maximize your purchase.  Money burning a hole in your pocket and trying to escape.   It would be a lot safer to stick to securities.  The worst that happens there is that you lose your investment (and it's more likely that the value will be reduced but recover).  With mortgages, you can lose your entire investment and then some.  Yes, the price may recover, but it may do so after the bank forecloses on the mortgage. In general people make a few key mistakes with property: 1) Not factoring in depreciation properly. Houses are perpetually falling down, and if you are renting them perpetually being trashed by the tenants as well - particularly in bad areas. Accurate depreciation costs can often run in the 5-20% range per year depending on the property/area. Add insurance to this as well. 2) Related to 1), they take the index price of house price rises as something they can achieve, when in reality a lot of the house price 'rise' is just everyone having to spend a lot of money keeping them standing up. No investor can actually track a house price graph due to 1) so be careful to make reasonable assumptions about actual achievable future growth.  3) Failure to price in the huge transaction costs (often 5%+ per sale) and capital gains/other taxes (depends on the exact tax structure where you are). These add up very fast if you are buying and selling at all frequently. 4) Costs in either time or fees to real estate rental agents. Having to fill, check, evict, fix and maintain rental properties is a lot more work than most people realise, and you either have to pay this in your own time or someone else’s. Again, has to be factored in. 5) Liquidity issues. Selling houses in down markets is very, very hard. They are not like stocks where they can be moved quickly. Houses can often sit on the market for years before sale if you are not prepared to take low prices. As the bank owns your house if you fail to pay the mortgage (rents collapse, loss of job etc) they can force you to fire sale it leaving you in a whole world of pain depending on the exact legal system (negative equity etc). These factors are generally correlated if you work in the same cities you are buying in so quite a lot of potential long tail risk if the regional economy collapses. 6) Finally, if you’re young they can tie you to areas where your earnings potential is limited. Renting can be immensely beneficial early on in a career as it gives you huge freedom to up sticks and leave fast when new opportunities arise. Locking yourself into 20yr+ contracts/activities when young can be hugely inhibiting to your earnings potential – particularly in fast moving jobs like software development.  Without more details on the exact legal framework, area, house type etc it’s hard to give more specific advise, but in general you need a very large margin of safety with property due to all of the above, so if the numbers you’re running are coming out close, it’s probably not worth it, and you’re better of sticking with more hands off investments like stocks and bonds. I would strongly, strongly advise against it. Others here are answering the question of, having decided to invest in property, how one ought to ensure that one invests in the right property. What has not really been discussed here is the issue of diversification. There are a number of serious risks to property investment. In fact, it is one of the riskiest types of investment. You face more of almost every type of risk in property than maybe any other asset class. It is one thing to take on those risks as part of a diverse portfolio including other asset classes. It is quite another - extremely irresponsible - thing to take on those risks as your sole investment, when your portfolio is in its infancy. So no, do not invest in property when you lack any other investments. Absolutely not. "I want to caveat that I am not an active investor in Australia, you most likely should seek out other investors in your market and ask them for advice/mentorship, but since you came here I can give you some generalized advice.  When investing in real estate there are a two main rules of thumb to quickly determine if the property will be a good investment. The 50% rule and the 2% (or 1%) rule.   The 50% rules says that in general 50% if the income from the property will go to expenses not including debt service.  If you are bringing in $1000 a month 500 of that will go to utilities, taxes, repair, capital expenditures, advertising, lawn care, etc. That leave you with 500 to pay the mortgage and if anything is left that can be cash flow.  As this is your first property and it is in "" a relatively bad neighbourhood"" you might consider bumping that up to 60% just to make sure you have padding. The 1 or 2% rules says that the monthly rent should be 1(or 2) percent of the purchase price in this case the home is bought at 150,000.  If the rent is 1,500 a month it might be a good investment but if it rents for 3,000 a month it probably is a good investment.  There are other factors to consider if a home meets the 2% rule it might be in a rough neighborhood which increases turnover which in general is the biggest expense in an investment property.  If a property meets one or both of these rules you should take a closer look at it and with proper due diligence determine that it is a deal.  These rules are just hard and fast guidelines to property analysis, they may need to be adapted to you market.  For example these rules will not hold in most (all?) big cities."
"Easiest thing ever. In fact, 99% of people are loosing money. If you perform worse then 10% annually in cash (average over 5-10 years), then you better never even think about trading/investing. Most people are sitting at 0%..-5% annually. They win some, loose some, and are being outrun by inflation and commissions. In fact, fall of market is not a big deal, stock indexes are often jump back in a few months. If you rebalance properly, it is mitigated. Your much bigger enemy is inflation. If you think inflation is small, look at gold price over past 20 years. Some people, Winners at first, grow to +10%, get too relaxed and start to grow already lost position. That one loose trade eats 10% of their portfolio. Only there that people realize they should cut it off, when they already lost their profits. And they start again with +0%. This is hard thing to accept, but most of people are not made for that type of business. Even worse, they think ""if I had bigger budget, I would perform better"", which is kind of self-lie." I also am paying roughly twice as much in rent as a mortgage payment would be on the type of house I have been looking at, so I'd really like to purchase a house if possible. Sounds like I need to rain on your parade a bit: there's a lot more to owning a house than the mortgage. Property tax, insurance, PMI, and maintenance are things that throw this off. You'll also be paying more interest than normal given your recent credit history. It's still possible that buying is better than renting, but one really should run the detailed math on this. For example, looking at houses around where I live, insurance, property tax and special assessments over the course of a year roughly equal the mortgage payments annually.  You probably won't be able to get a loan just yet. If you've just started your new job it will take a while to build a documentable income history sufficient for lenders. But take heart! As you take the next year to save up a down payment / build up an emergency fund you'll discover that credit score improves with time. However, it's crucial that you don't do anything to mess with the score. Pay all your bills on time. Don't take out a car loan. Don't close your old revolving accounts. But most of all, don't worry. Rent hurts (I rent too) but in many parts of the US owning hurts more, as your property values fall. A house down the street from my dear old mother has been on the market for several months at a price 33 percent lower than her most recent appraisals. I'm comfortable waiting until markets stabilize / start rising before jumping on real estate. You say  My work is steady; even if I lost my job it'd be easy to get another. Location has been static for a few years now, but I'm not sure that'll extrapolate to the future; I'm lazy, so I don't want to move, but for a significantly better job opportunity I wouldn't mind.   The general rule of thumb is that you'll come out ahead if you buy a house (with a mortgage) and live there for five years.  What you lose in interest, you make up in rent.  And living there for five years, you make back your closing costs in equity.  If you're there less than five years though, you don't make back the closing costs.  You'd have been better off renting.   Historically (up to about twenty years ago), your mortgage payment and rent payment for the same basic property would be about the same.  I.e. if your current landlord sold you what you are renting, your mortgage payment would be roughly the same as your rent.  Maybe a little lower or a little higher but about the same.  More recently, it hasn't been strange to see a divergence in those.  Now it is not uncommon for a mortgage payment to be 50% higher than rent on the same property.   This has some consequences.  First, your $1000 rent probably won't stretch as far as a $1000 mortgage payment.  So you'll be buying something that you'd only pay $650 or $700 rent.  Second, if you move and can't sell immediately, you'll get less in rent than you'd pay in mortgage.  Rather than contributing to your income, the property will require subsidy just to maintain the mortgage.  And in the early years of the mortgage, this means that you're paying all of the principal (equity) and some of the interest.   Buying a duplex makes this worse.  You have your side and their side.  You can substitute your $1000 rent for half of the mortgage payment.  Meanwhile, they are paying $700 in rent.  You have to subsidize the mortgage by $300.  Plus, you are talking about hiring a property management company to do things like lawn maintenance.  There goes another $100 a month.  So you are subsidizing the mortgage by $400.   I don't know real estate prices in Utah, but a quick search finds a median house price over $200,000.  So it seems unlikely that you are buying new construction with new appliances.  More likely you are buying an existing duplex with existing appliances.  What happens when they fail?  The renter doesn't pay for that.  The property management company doesn't pay for that (although they'll likely arrange for it to happen).  You pay for it.   Also, it often takes a bit of time to clean up the apartment after one tenant leaves before the new tenant starts paying rent.  That's a dead weight loss.  If this happens during a local recession, you could be carrying the mortgage on a property with no offsetting rental income for months.   There are some countervailing forces.  For example, if house prices in your area are increasing, the rent will increase with them (not necessarily at the same pace).  But your mortgage payment stays the same.  So eventually the rent may catch up with the mortgage payment.  If you wait long enough in a strong enough market, the rent on the other half of the duplex may cover the entire mortgage payment.   If you currently have an urban apartment within walking distance of work and switch to a suburban apartment with a commute, you have a better chance of finding a duplex where the entire mortgage payment is only the $1000 that you pay in rent.  Your half of the duplex won't be as nice as your apartment is, and you'll have a half hour or hour long commute every morning (and the same to get home in the evening).  But on strictly fiscal terms you'll be doing about as well.  Plus you have the income from the other half.  So even if your mortgage payment is more than your rent payment, you can still break even if the rent covers it.   Consider a $1400 mortgage and $400 in rent from the other half (after property management fees).  So long as nothing goes wrong, you break even.  Perhaps the agreement is that your parents take care of things going wrong (broken appliances, troublesome tenants, time between tenants).  Or perhaps you drain your emergency fund and adjust your 401(k) payment down to the minimum when that happens.  Once your emergency fund is replenished, restore the 401(k).   If you're willing to live in what's essentially a $500 apartment, you can do better this way.  Of course, you can also do better by living in a $500 apartment and banking the other $500 that you spend on rent.  Plus you now have the expenses of a commute and five hours less free time a week.   You describe yourself as essentially living paycheck to paycheck.  You have adequate savings but no building excess.  Whatever you get paid, you immediately turn around and spend.  Your parents may view you as profligate.  Your apartment is nicer than their early apartments were.  You go out more often.  You're not putting anything aside for later (except retirement).   It didn't use to be at all strange for people to move out of the city because they needed more space.  For the same rent they were paying in the city, they could buy a house in the suburbs.  Then they'd build up equity.  So long as they stayed in roughly the same work location, they didn't need to move until they were ready to upgrade their house.   The duplex plan leads to one of two things.  Either you sell the duplex and use the equity to buy a nicer regular house, or you move out of the duplex and rent your half.  Now you have a rental property providing income.  And if you saved enough for a down payment, you can still buy a regular house.   From your parents' perspective, encouraging you to buy a duplex may be the equivalent of asking you to cut back on spending.  Rather than reducing your 401(k) deposits, they may be envisioning you trading in your car for a cheaper one and trading in your nice but expensive apartment for something more reasonable in a cheaper neighborhood.  Rather than working with a property management company, you'll be out doing yardwork rather than cavorting with your friends.  And maybe the new place would have more space to share when you meet someone--you aren't going to provide many grandkids alone.   If you get a mortgage on a duplex, you are responsible for paying the mortgage.  You are responsible even if something happens to the house.  For example, if a fire burns it down or a tornado takes it away.  Or you just find that the house isn't solid enough to support that party where all of your friends are jumping up and down to the latest pop sensation.  So beyond losing whatever you invest in the property, you may also lose what you borrowed.   Now consider what happens if you invest the same amount of money in General Motors as in the house.  Let's call that $10,000 and give the house a value of $200,000.  With General Motors, even if they go bankrupt tomorrow, you're only out $10,000.  With the house, you're out $200,000.  Admittedly it's much hard to lose the entire $200,000 value of the house.  But even if the house loses $80,000 in value, you are still $70,000 in the hole.   You don't need a disaster for the house to lose $80,000 in value.  That's pretty much what happened in the 2006-2010 period.  People were losing all of what they invested in houses plus having to declare bankruptcy to get out of the excess debt.  Of course, if they had been able to hold on until 2015 markets mostly recovered.  But if you lost your job in 2008, they wouldn't let you not make mortgage payments until you got a new one in 2012.   When you declare bankruptcy, you don't just lose the house.  You also lose all your emergency savings and may lose some of your belongings.   There are some pretty prosaic disasters too.  For example, you and your tenant both go away for a weekend.  It rains heavily and your roof starts to leak due to weak maintenance (so not covered by insurance).  The house floods, destroying all the electronics and damaging various other things.  Bad enough if it's just you, but you're also responsible for the tenant's belongings.  They sue you for $20,000 and they move out.  So no rent and big expenses.  To get the house livable again is going to take $160,000.  Plus you have a $190,000 mortgage on a property that is only worth about $40,000.  That's at the extreme end. "I agree with Joe Taxpayer that a lot of details are missing to really evaluate it as an investment... for context, I own a few investment properties including a 'small'  10+ unit apartment complex. My answer might be more than you really want/need, (it kind of turned into Real Estate Investing 101), but to be fair you're really asking 3 different questions here: your headline asks ""how effective are Condo/Hotel developments as investments?"" An answer to that is... sometimes, very. These are a way for you-the investor-to get higher rents per sq. ft. as an owner, and for the hotel to limit its risks and access additional development funding. By your description, it sounds like this particular company is taking a substantial cut of rents. I don't know this property segment specifically, but I can give you my insight for longer-term apartment rentals... the numbers are the same at heart. The other two questions you're implying are ""How effective is THIS condo/hotel development?"" and ""Should you buy into it?"" If you have the funds and the financial wherewithal to honestly consider this, then I am sure that you don't need your hand held for the investment pros/cons warnings of the last question.  But let me give you some of my insight as far as the way to evaluate an investment property, and a few other questions you might ask yourself before you make the decision to buy or perhaps to invest somewhere else.  The finance side of real estate can be simple, or complicated. It sounds like you have a good start evaluating it, but here's what I would do: Start with figuring out how much revenue you will actually 'see': Gross Potential Income: 365 days x Average Rent for the Room = GPI (minus) Vacancy... you'll have to figure this out... you'll actually do the math as (Vacancy Rate %) x GPI (equals) Effective Potential Income = EPI Then find out how much you will actually pocket at the end of the day as operating income: Take EPI (minus) Operating expenses ... Utilities ... Maintenace ... HOA ... Marketing if you do this yourself (minus) Management Expenses ... 40% of EPI ... any other 'fees' they may charge if you manage it yourself. ... Extra tax help? (minus) Debt Service ... Mortgage payment ... include Insurances (property, PMI, etc) == Net Operating Income (NOI) Now NOI (minus) Taxes == Net Income Net Income (add back) Depreciation (add back) sometimes Mortgage Interest == After-tax Cash Flows There are two ""quickie"" numbers real estate investors can spout off. One is the NOI, the other is the Cap Rate.  In order to answer ""How effective is THIS development?"" you'll have to run the numbers yourself and decide. The NOI will be based on any assumptions you choose to make for vacancy rates, actual revenue from hotel room bookings, etc. But it will show you how much you should bring in before taxes each year. If you divide the NOI by the asking price of your unit (and then multiply by 100), you'll get the ""Cap Rate"". This is a rough estimate of the rate of return you can expect for your unit... if you buy in.  If you come back and say ""well I found out it has a XX% cap rate"", we won't really be qualified to help you out. Well established mega investment properties (think shopping centers, office buildings, etc.) can be as low as 3-5 cap rates, and as high as 10-12. The more risky the property, the higher your return should be. But if it's something you like, and the chance to make a 6% return feels right, then that's your choice. Or if you have something like a 15% cap rate... that's not necessarily outstanding given the level of risk (uncertain vacancies) involved in a hotel.  Some other questions you should ask yourself include:  How much competition is there in the area for short-term lodging? This could drive vacancies up or down... and rents up or down as well How 'liquid' will the property (room) be as an asset? If you can just break even on operating expense, then it might still make sense as an investment if you think that it might appreciate in value AND you would be able to sell the unit to someone else.  How much experience does this property management company have... (a) in general, (b) running hotels, and (c) running these kinds of condo-hotel combination projects? I would be especially interested in what exactly you're getting in return for paying them 40% of every booking. Seasonality? This will play into Joe Taxpayer's question about Vacancy Rates. Your profile says you're from TX... which hints that you probably aren't looking at a condo on ski slopes or anything, but if you're looking at something that's a spring break-esque destination, then you might still have a great run of high o during March/April/May/June, but be nearly empty during October/November/December.  I hope that helps. There is plenty of room to make a more ""exact"" model of what your cash flows might look like, but that will be based on assumptions and research you're probably not making at this time." Yes, but should you be even trying to get a mortgage if you can't aford at least a 5% deposit? Prove you do want the house by doing without a new car for a few years... I would suggest, both as an investor and as someone who has some experience with a family-run trust (not my own), that this is probably not something you should get involved with, unless the money is money you're not worried about - money that otherwise would turn into trips to the movies or something like that.  If you're willing to treat it as such, then I'd say go for it. First off, this is not a short or medium term investment.  This sort of thing will not be profitable right away, and it will take quite a few years to become profitable to the point that you could take money out of it - if ever.  Your money will be effectively, if not actually, locked up for years, and be nearly entirely illiquid. Second, it's not necessarily a good investment even considering that.  Real estate is something people tend to feel like it should be an amazing investment that just makes you money, and is better than risky things like the stock market; except it's really not.  It's quite risky, vulnerable to things like the 2008 crash, but also to things like a local market being a bit down, or having several months with no renter.   The amount your fund will have in it (at most $100x15/month) won't be enough to buy even one property for years ($1500/month means you're looking at what, 100-150 months before you have enough?), and as such won't have enough to buy multiple properties for even longer, which is where you reach some stability.  Having a washing machine break down or a roof leak is a big deal when you only have one property to manage; having five or six properties spreads out the risk significantly. You won't get tax breaks from this, of course, and that's where the real issue is for you.  You would be far better off putting your money in a Roth IRA (or a regular IRA, but based on your career choice and current income, I'd strongly consider a Roth).  You'll get tax free growth, less risky than this fund AND probably faster growing - but regardless of both of those, tax free.  That 15-25% that Uncle Sam is giving you back is a huge, huge deal, greater than any return a fund is going to give you (and if they promise that high, run far and fast). Finally, as someone who's watched a family trust work at managing itself - it's a huge, huge headache, and not something I'd recommend at least (unless it comes with money, in which case it's of course a different story).  You won't agree on investments, inevitably, and you'll end up spending huge amounts of time trying to convince each other to go with your idea - and it will likely end up being fairly stagnant and conservative, because that's what everyone will be able to at least not object to. It might be something you all enjoy doing, in which case good luck - but definitely not my cup of tea. Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule. "Nobody has mentioned your ""risk tolerance"" and  ""investment horizon"" for this money. Any answer should take into account whether you can afford to lose it all, and how soon you'll need your investment to be both liquid and above water. You can't make any investment decision at all and might as well leave it in a deposit-insured, zero-return account until you inderstand those two terms and have answers for your own situation."