Author Topic: Is this another one of my crazy "short lived" ideas?  (Read 4494 times)

1tolivesimply

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Is this another one of my crazy "short lived" ideas?
« on: December 19, 2012, 08:59:13 PM »
On a previous thread I explained my current situation; In case you do not want to go back and check it out, I currently have two rental properties and my house.
I've been thinking about renting out my house and buying another property for me to live. Until a few days ago, I was looking for a SFR (ranch with basement) in my city, now I'm actually considering a Downtown condo.

These are the numbers from the previous thread:

Job Income.......: ~$140 K

Rental 1...........: ~$ 85 K - owe $59K
Rent.................: ~$800
Expenses.........: ~$500

Rental 2...........: ~$190 K - owe $145K
Rent.................: ~$1400
Expenses.........: ~$1000

Home...............: ~180 K - owe $105K (been paying it down, now owe 97K)

401(k)..............: ~$65k - on autopilot
Cash................: ~$60k - depreciating on a couple of savings accounts.
VTSAX..............:  ~10K - bought it in November

The condos I've been looking at are ~$330K, adding taxes & insurance, the monthly payment goes up to about $1,800; my reasoning is that whenever I get tired of my current job (100% travel), I would want to be close to where most jobs are, plus I love downtown Denver, the drawback (other than the cost) would be being an hour away from my investment properties.

The other option is buying another house for ~$200K in Northern Colorado, or completely forget about buying more properties and invest on something else.

What do you think?

Edited to answer Another Reader's question on the other thread (missed it for some reason):
As of now, I'm not even dating anyone (I know that can change anytime), but for now, wife / kids are at least a couple of years away.
« Last Edit: April 07, 2013, 07:43:38 AM by 1tolivesimply »

arebelspy

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #1 on: December 19, 2012, 09:52:20 PM »
What would it cost you to rent one of those condos?
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1tolivesimply

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #2 on: December 19, 2012, 10:17:21 PM »
A 2/2 (1,000+ sq/ft)  like the one I'm referring to rents for $1,800+ if I'm lucky, they're usually over $2K.

arebelspy

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #3 on: December 19, 2012, 10:34:28 PM »
If I was deciding to rent for 1800-2000 or own for 330k, I'd rent.  Especially a condo.  YMMV.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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marty998

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #4 on: December 19, 2012, 10:41:44 PM »
I'd do the opposite. Shelling out $24k a year for rent really is dead money. I suppose if house prices over where you are keep falling then it is a wise move but over here the mentality is quite different.


Ben

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #5 on: December 20, 2012, 05:41:43 AM »
I would echo Joe's comment- the numbers don't appear to work out on the rent-or-buy comparison, so I'd go with the flexibility of renting. Does that $1800 include condo fees?


dragoncar

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #6 on: December 20, 2012, 12:19:48 PM »
Completely depends on HOAs.  At your income, assuming mortgage interest deduction, carrying cost for $330k is around $820/mo, maybe $900/mo if you save for some appliance repairs.  So if the HOA dues are a more reasonable, say $200, buying looks great compared to renting at $1800.  If HOA dues are on the higher end, say $600, it becomes a much closer call.

Of course, if you retire or lose the deductions, then the carrying cost goes up.

Edit for my numbers:
30 year interest rate of 3.44% applied to full $330k, property taxes of 1%, CO income tax of 4.63%, federal marginal rate of 28%, assume insurance cost and utilities are similar to renters insurance (HOAs should cover the building itself).
« Last Edit: December 20, 2012, 12:24:25 PM by dragoncar »

1tolivesimply

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #7 on: December 20, 2012, 02:15:35 PM »
I'm including the HOA dues on the monthly payment:

- Mortgage:   $1,216 (20% down, balance 264K @ 3.7% - $1,177 @ 3.44%)
- Taxes:         $   156
- Insurance:   $     17 (maybe less?)
- HOA:            $   332
Total:             $1,721

arebelspy

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #8 on: December 20, 2012, 05:49:40 PM »
Have you checked on NYT's buy vs rent calculator?

What, for example, is the opportunity cost on that 20% down?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

dragoncar

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #9 on: December 20, 2012, 09:20:46 PM »
This risk free opportunity cost is very close to the mortgage rate, so it's reasonable to calculate carrying cost based on a zero down loan.

Jack

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #10 on: December 21, 2012, 01:34:34 AM »
If your current job is 100% travel, why the heck don't you just rent a cheap studio apartment?!

1tolivesimply

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Re: Is this another one of my crazy "short lived" ideas?
« Reply #11 on: December 21, 2012, 09:42:53 AM »
I looked into the calculator and it says it makes sense to buy after 2 years, not sure how long I would live in the condo though, I might either love it and stay forever or hate it (in which case it would be better to rent).

As far as the studio, I did that for over 2 years, so I want to have a nice place now...
« Last Edit: April 07, 2013, 07:48:04 AM by 1tolivesimply »