Should I Buy My Condo?

[stolls_397]

My wife and I rent our condo in Orlando for $1600/mo. It's a 2 bed, 1 office, 2 bath, and we love it. We just wish we had our own yard. We have a nice green space out back though. The landlord recently asked if we'd like to buy it for $210,000. Comparable SFHs in our area are REALLY hard to find right now, and they go for $330–380,000. Condos are also hard to find.

Joint income is $180,000 a year. We plan on getting a small dog this year and starting to have kids. After kids, income would drop to $140,000. We have no debt. We think we could stay here for at least 4 years, maybe more. Every buy vs. rent calculator I look at says it's better to buy than rent, even with that short time horizon.

Any thoughts on whether to pull the trigger or wait? Just not sure when to buy. This will be my first home purchase, and I'm very hesitant about large financial decisions in general. The market is so crazy right now that I don't know what's wise.

[yachi]

It doesn't sound like a bad deal, but you need to include any utilities covered by your rent, and HOA fees to properly compare.

[stolls_397]

Thanks for your thoughts. Yeah, that's a good point.

Rent = $1600/mo. No utilities included. $260 HOA is included in the rent. Obviously, with a mortgage, the HOA will be added to the mortgage amount.

Putting all those details into a 30-year mortgage calculator appears to make my mortgage payment + HOA + taxes + insurance = $1171/mo.

[yachi]

If you're committed to the area, I think it sounds like a great idea.  You'll have no moving expenses to make the purchase, and the price is reasonable.  Being a condo things like parking lot paving & striping, roof repairs, and exterior repairs are all covered by the HOA fee.  That is, they should be covered, sometimes the HOA board doesn't hold back enough money for future repairs and they need to increase the HOA fee.*  You'll want to (at least mentally) set aside some of the savings between the renting and buying cost for repairs or upgrades.  Things like HVAC repair and servicing, plumbing repairs and replacements and carpet and appliance replacement will be on your plate now. 


*Even in the case of your HOA fee increasing because they forgot to save for the eventual replacement of the parking lot, chances are your landlord would want to recoup these costs when your lease renews so you can't say you'd be better off renting.

[robartsd]

We think we could stay here for at least 4 years, maybe more. Every buy vs. rent calculator I look at says it's better to buy than rent, even with that short time horizon.

That time frame is a bit shorter than I would want; but that might depend a lot on how likely the "maybe more" would be. I can imagine having two kids sharing the second bedroom at least a few years past the 4 year mark (the older child would only be about 3 at that point).

That is, they should be covered, sometimes the HOA board doesn't hold back enough money for future repairs and they need to increase the HOA fee.*

Probably a good idea to check on the health of the HOA before committing to the purchase.

Another thing to note, the landlord offering to sell to you may indicate that he intends to sell the property but is generously giving you the first opportunity at a reasonable price, so you possibly could be forced to move if you don't decide to purchase (of course it's also possible that another investor would buy the property and be happy to keep stable tenants).

[cool7hand]

Probably a good idea to check on the health of the HOA before committing to the purchase.

This is key. After about 20 years, HOAs require increasing amounts of funding as the need for capital expenditures increases: paving, roofing, siding/painting, landscaping, common areas (pools, tennis courts, clubhouses, etc.). You also should ask for copies of the master deed and two most recent reserve studies (one should be done every 5 to 10 years), as well as financials statements and board minutes for the last five years.

[yachi]

Probably a good idea to check on the health of the HOA before committing to the purchase.

This is key. After about 20 years, HOAs require increasing amounts of funding as the need for capital expenditures increases: paving, roofing, siding/painting, landscaping, common areas (pools, tennis courts, clubhouses, etc.). You also should ask for copies of the master deed and two most recent reserve studies (one should be done every 5 to 10 years), as well as financials statements and board minutes for the last five years.

Right, and a properly managed HOA will have 20 years of savings built up to fund these capital expenditures.  There are companies that do reserve studies to make sure building managers are saving enough for future needs.  Here are some examples: https://www.rdanorthwest.com/reserve-study-professionals/sample-studies/
You want to see that happening, otherwise the million dollars of savings an HOA holds looks like plenty of money for some resident's new pet project.
I know of someone who needed to pay an extra assessment into his HOA because the HOA hadn't been properly mowing the stormwater retention pond, and a tree grew in it and damaged the drain.