“We want to buy in Coronado Bay condos. We love the place.
“We are deciding between a fourth-floor unit with limited view of ocean, but it has a huge outdoor terrace with sliding doors that open the two-bedroom place up. Highly upgraded, fully furnished. Price is US$290k.
“Our other choice is the top floor, 23. One bedroom, small balcony, but with fantastic views of the beach, town, and mountains. Just needs a few changes. About US$5k worth. Price is US$245k.
“Rentals about US$1,200/month versus US$1,600/month for the two. We would like to use as short-term rental and stay there when we can. Two bedrooms are fewer in this building.
“We love both. We do love outdoor space. And we love to-die-for views. What a dilemma!
“Please if you can give us your opinion. After reading your book, it seems like you are definitely the one to guide us.”
–Anthony B., United States
The difference in potential gross rental yield between the two units you reference is about 1% a year, with the two-bedroom coming out on top with its US$1,600 of rental income a month. You might expect occupancy to be better with the two-bedroom, as well, considering there are fewer of those units.
On the other hand, the ocean-view unit would likely find a resale buyer quicker.
You don’t mention the size of the units, so I can’t make a per-square-meter price comparison, but you should. That’s a critical metric. It seems, though, that the one-bedroom unit is priced at a premium, meaning you might have more appreciation potential with the two-bedroom.
At the end of the day, neither one is offering stellar rental yields, with full-occupancy gross yields between 5.5% to 6.6%. You’d likely net maybe 4% to 5% per year. Bottom line, therefore, I’d go with the unit you like better.
Continue Reading: How To Save 80% Or More On Your Healthcare Expense.