Hi all,
I'm in a situation where my landlord said he'd be willing to sell me the condo I'm renting at a considerable discount. He's a genuinely super nice older guy who my friend got to give me below market rent for the past two years. He recently (at my inquiry) said he'd be willing to sell the place to me and said to "do some research and come up with an offer, go ahead and low ball me, I won't be insulted and I'll probably take it". He never had kids and is just sort of trying to help me out in a fatherly way.
But I need some advice, here's the current situation(amounts rounded):
-Student loan debt -20,000 (interest rate is 6.00%, after tax 4.74%)
-401k balance +20,000
-In brokerage (cash + blue chips) +20,000
-Current savings rate $2,000 per month
-Down payment + closing costs required -$20,000
-Monthly living expenses (including rent) $1,250
I think I can get the condo for between $84-$104 per square foot , which is below market. Recent sales in my complex range from $89-$121 per square foot, and my unit has been remodeled/updated so i think it's on the higher end. I'd be getting a 15-year mortgage @2.75% and my monthly payments would be slightly higher than I'm paying right now in rent (payments = mortgage+ property taxes + HOA dues). It's in a great neighborhood and I see myself staying here for quite a few more years. I could also rent it out cash flow positive if I ever moved.
(Note: I've calculated tax savings on the mortgage interest + property taxes, the tax benefits are negligible - about $50 per month, and will disappear in a few years as the balance is paid down and I am in a lower tax bracket because I'm semi-retired!)
I don't like the idea of taking out any more debt, but it seems like a really good opportunity. I also want to keep a cash cushion of 6-12 months expenses. What would you do?