Author Topic: Buy a condo or be a landlord and renter  (Read 2388 times)

nawhite

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Buy a condo or be a landlord and renter
« on: April 04, 2013, 08:40:28 AM »
I've never bought a property before but my wife and I have been throwing around the idea of buying a condo. We live in a great neighborhood, biking distances to both of our works. We found a couple condos for sale about a 1/4 mile up the road and I wanted some advice on if they are decent deals as this forum is basically my only knowledge source so far for being a landlord.

$50,000 (would probably have to buy with cash)
$345 HOA includes insurance, major (i.e. roof) repairs, and all utilities
Could rent out for $900/month

This sounds like a decent deal, but am I doing the math right? Being conservative:
$900-$350 = $550 revenue.
$550/2 to cover repairs and vacancies = $275/month return (note this ignores what the HOA would cover but we're being conservative)
$275 * 12 = $3300/year
$3300/$50000 = 6.6% return on investment

If I say the HOA covers 50% of all repairs I'll have to make (heater, A/C, Roof) then the return goes up to 9.9%

What am I missing? Does this sound worthwhile?

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Also, if I currently live in an apartment where I pay $950 including utilities would I be better off moving into the new place or staying where I'm at and being a landlord at the same time? I don't know how to do the math on that one.

SunshineGirl

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Re: Buy a condo or be a landlord and renter
« Reply #1 on: April 04, 2013, 09:33:42 AM »
I'll reply as to your current living situation: Since you know and like the neighborhood and it's so close to your jobs, and you're paying that amount in rent, I think that if the condo checks out and is something you could see yourself living in, it makes very good sense to purchase it for cash, assuming you would live there for 3-5 years.

NumberCruncher

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Re: Buy a condo or be a landlord and renter
« Reply #2 on: April 04, 2013, 09:38:14 AM »
Also, if I currently live in an apartment where I pay $950 including utilities would I be better off moving into the new place or staying where I'm at and being a landlord at the same time? I don't know how to do the math on that one.

Well, you can treat the $950 you would have spent in rent at your apartment as the rent you "earn" at the condo since utilities are included in both. (looks like living there yourself might make more sense, assuming you like it more or the same as your current place, especially since being a landlord takes a good amount of time.)

That doesn't factor in when you might want to move again, so I'd look at nyt rent vs buy calculator: http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0 (and make sure you go into advanced settings to change all the appropriate assumptions)

Also - property taxes? Might change things.