Best Investment- The tale of two cities

[rogercbryan]

Best Investment- The tale of two cities

I would like to buy another property but I’m torn between two different markets; Cleveland, OH (suburbs) or Washington, DC. Below is an outline of each plan and I’m hoping for some good advice to help me with my decision. This is a vague outline.

Here are the constants in both equations:
This would be my second property – I own a home in Cleveland and rent an apartment in Washington, DC
100% financing secured for both properties *(includes all closing costs)
$25,000 cash on hand for emergencies
*All monetary amounts are +/- 5%

Option 1: Cleveland, OH
Cost: $85,000 (foreclosure)
Local Comps: $135,000
Estimated Repairs: $20,000
All repairs will be done by a trusted general contractor who I and other friends I know have used in the past. He has always been perfect when it comes to staying with in budget. This would be my first ‘flip’. All the numbers look good and I’m well capitalized for any problems that may arise. The housing market in Cleveland has always been poor. Before the ‘credit crunch’ Cleveland had the highest rate of foreclosures in the US.

With a total planned investment of $105,000 I could afford to price the house at $130,000 and even accept an offer of $125,000 in order to make the sale. This would leave me with a possible $20,000 profit in about 90 days. I may have another $2000-$3000 in expenses for mortgage payments if the house goes over 90 days.

Best benefit: Leaves open credit to do another deal in the next 12 months and has decent margins
Drawback: High risk and would be done remotely (I’m only in Cleveland on the weekends).


Option 2: Washington, DC
Cost: $275,000
Local Comps (six months ago) $360,000
Recent Comps (last 30 days) $299,000 (2 units sold)
*This a flat in a 12 story building

If I was to purchase this property I would actually live there. The property needs absolutely nothing. The kitchen was redone in 2005 and the bathroom in 2006. This place is smaller then my current apartment (not by much) and is a bit more expensive. If I was to purchase this property I would be committing to my belief that the housing market in DC will pick back up in 2010. This would allow me to sell the property for enough to cover my entire living expenses for two years (roughly $24,000 per year) and to take out a small marginal profit. The math works in my head even if I’m not explaining it well. Currently I’m renting which in my mind is a waste of money.

Best Benefit: Instant equity
Drawback: Maxes out credit for at least 2 years

I’m looking for guidance or comments. I have about 10 days to make a decision before I loose one of the properties. I hate time frames like this as they tend to become emotional and less practical. Help?

[BusinessAdviser]

Hands down, my opinion is the DC property.