Buy condo to live in, then rent out when leave the country

[scrofty]

Hi all,

Came across this website a few days ago and I love the philosophy, which fits pretty closely with the one I have been living for a number of years - good to be in a group of like minded people. It is also quite opportune timing as I'm thinking of making a property investment.

An overview of my current situation. I live in Chicago and currently pay $1600 a month for a studio, including covered parking. I've been here 3 years and fed up of burning through so much cash for no return. That being said, there is a very good chance that within the next 24 months I will leave the country, perhaps for good (not an American by birth but am a green card holder).

Therefore any potential property I purchased I would look to rent out as it seems very very unlikely the value would go up enough quickly enough to cover the buying/selling costs!

So I've been running the numbers on the basis of renting out for a period of years. I've built up a spreadsheet so I can tinker with the numbers for different properties and different what-if scenarios. I've attached it for anyone who might find it useful, you will also see there is a tab with some of my assumptions and data sources. If anyone want to use it and has questions, let me know.

Basically I would appreciate some input on checking some of my logic that I'm using to make my assessment and some further advice should the trigger to buy be pulled

- acquisition costs of 5% of property value and sale costs of 10% of property value (excluding taxes). Are these realistic? Any ways to trim them down?
- as there is a good chance I will be a long way away from the property when I sell, how challenging is it to sell property remotely?
- is it worth setting up an LLC to buy and run the property to limit the liability risk? Should this be done when the purchase is made, even if I do not intend to rent it out immediately but live in it instead?
- when the property no longer becomes my principal residence, do the deeds have to change to reflect this? Are there any charges associated with this?

Thanks

[KingCoin]

Don't do it.

If you want to buy a rental property, buy the property that makes the most sense as a rental property and find a high quality property manager to manage it for you.

If you want a residence, find the property that makes the most sense as a residence.

The fact is, these properties will very rarely be the same. Urban condos are usually poor investment properties due to HOA and condo fees that take a very large chunk of rental income. Coupled with a management fee, you could easily be paying away 20-40% of your top-line revenue before even starting to deal with things like insurance, maintenance, and taxes.  If you're moving out of the country, that makes saddling yourself with a US property even less compelling. The exception might be if you buy a "fixer-upper" that you intend to renovate while occupying, but this doesn't seem like the type of thing you're looking to do.

Being "fed up of burning through cash" on rent is an emotional assessment not a mathematical one. Burning money on rent is often a financially superior choice compared to buying. Run another spreadsheet to calculate how you'd do investing in index funds, and I suspect that is will compare very favorably to buying a sub-par rental property.

[scrofty]

Thanks for the reply

Correct, being fed up is an emotional stand - hence why I want to check my numbers before I leap or stand! But I get what you're driving at. If a good rental property can be found then it might make sense but should be assessed on its own merit. Otherwise keep paying the rent

I don't really see why a good rental property should be a bad home to live in, however. Surely a good rental will be a desirable property and thus one I would want to live in?

[arebelspy]

Thanks for the reply

Correct, being fed up is an emotional stand - hence why I want to check my numbers before I leap or stand! But I get what you're driving at. If a good rental property can be found then it might make sense but should be assessed on its own merit. Otherwise keep paying the rent

I don't really see why a good rental property should be a bad home to live in, however. Surely a good rental will be a desirable property and thus one I would want to live in?

Homes that are desirable to live in often go for a lot more money due to the owner occupants driving up prices in those areas to where they don't make sense as a rental based on the rents you could get.  The best rentals, IMO, are blue collar neighborhoods.  I'd absolutely live there, but many upper-middle class people want better neighborhoods for their primary residence.

[MrFrugalChicago]

As someone who lives in Chicago, 1600 for a studio is INSANE.  You must be like Lincoln Park or River North?

Go get rent a nice 1 bedroom is North Center or Ravenswood or any of the decently priced + safe neighborgoods. You should be able to come in closer to 1k.  Or you can go down a little in quality and hit 700-800 range. Either option should be more space than you have now, for a lot less money.

Home prices in general went up 20% in the past year. I think you are past the time it would be smart to buy + rent... if you are moving soon, you want to rent - just rent at a more reasonable price.