Author Topic: Is this a decent rental?  (Read 2832 times)

Roots&Wings

  • Handlebar Stache
  • *****
  • Posts: 1166
Is this a decent rental?
« on: February 28, 2015, 08:19:07 AM »
Looking to purchase a home that will also work as an investment in case plans change and I need or want to move.

Potential property:
1,000 sf, 2 bed/2 bath condo 
Small condo complex in a nice quiet area, pet friendly.
High owner occupant rate (90%), no one is currently delinquent on condo fees
Needs cosmetic updates ~ 10k

$60k purchase price - $20k down + $10k improvements = $50k financed @ 4% for 30 yrs
family financing, no buying closing costs

Financing - $239/mo, $2,868 yr
Property Taxes - $100/mo, $1,200 yr
Insurance - $33/mo, $400 yr
Condo fees - $200/mo, $2,400 yr
Maintenance - $33/mo, $400 yr (interior only, exterior covered by condo fees)
Vacancy (1 month) - $62/mo, $750 yr
------------------------------------------
Total - $667/mo, $8,004 yr

Rent for $750/mo, $9,000 yr (Realtor said $750-$800/mo, going with lower value)

When I plugged the numbers into the NY Times rent or buy calculator, it came back with a rental price of $684/mo, so buying appears better than renting, assuming the condo finances/reserves are in good shape (will investigate further). Not a stellar investment perhaps, but not horrible?

Any thoughts or advice?

Thanks!

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28259
  • Age: -999
  • Location: Seattle, WA
Re: Is this a decent rental?
« Reply #1 on: February 28, 2015, 09:12:11 AM »
I would not buy a condo for 70k (after repairs) that had $200/mo HOA and only rented for $750, personally.  You might do just better than break even, with a decent amount of hassles.  YMMV.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, 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.

SaintM

  • Guest
Re: Is this a decent rental?
« Reply #2 on: February 28, 2015, 12:53:34 PM »
Your numbers give a 5% yield on investment ($1k net income/$20k cash outlay), which would be tax free, plus a little equity build up.  I would look for something more than that in a rental.

clarkfan1979

  • Handlebar Stache
  • *****
  • Posts: 1959
  • Age: 40
  • Location: Pueblo, CO
Re: Is this a decent rental?
« Reply #3 on: February 28, 2015, 05:53:07 PM »
Without knowing anything else, the current numbers do not look impressive. If you are not optimistic about appreciation, it doesn't seem worth the time. I don't know the whole story, are there any other reasons for the purchase?

Dividend Youngster

  • 5 O'Clock Shadow
  • *
  • Posts: 18
  • Age: 29
  • Location: New York
    • Dividend Youngster
Re: Is this a decent rental?
« Reply #4 on: February 28, 2015, 07:03:06 PM »
Insurance sounds a little low to me

malacca

  • Stubble
  • **
  • Posts: 232
  • Location: Malaysia!!!
Re: Is this a decent rental?
« Reply #5 on: February 28, 2015, 11:06:07 PM »
$1200 in taxes on a 60K condo? That's unreal.

Some of mine are as low as $310 for a condo (also worth about $60K).

Given that the 10+ year prospects for property appreciation aren't above inflation I can't see where you would make money. $100 a month for the hassle / risk of owning a place? No.

Offer $40k and pray.

Roots&Wings

  • Handlebar Stache
  • *****
  • Posts: 1166
Re: Is this a decent rental?
« Reply #6 on: March 01, 2015, 07:58:58 AM »
Thanks everyone!  Thought it might be a contender cause it met the 1% rule and was just over 50% rule, but the consensus is clearly "no". 

It was the first property with half decent numbers (on the surface) in a nice walkable location I would actually want to live...the other investment rental deals here are all in areas where I would never live or feel safe. 

Anyway, it went under contract last night for more than list price (not to me), so onwards in the search :)

navystache

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Is this a decent rental?
« Reply #7 on: March 02, 2015, 12:43:37 AM »
I would only buy a condo if it met the 2% rule.  Too many fee's!

jmusic

  • Bristles
  • ***
  • Posts: 465
  • Location: Somewhere...
Re: Is this a decent rental?
« Reply #8 on: March 02, 2015, 12:50:23 PM »
Even though this is a dead deal, it's worth mentioning that I wouldn't exclude exterior maintenance in my calculus for evaluating a rental thinking the HOA will cover it.  That works until... Special Assessment.

mathew1659

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Is this a decent rental?
« Reply #9 on: March 06, 2015, 08:50:27 AM »
General rule: Never buy a property that has HOA's or other fees that you do not control unless it is a unbelievable deal.... even then its questionable. They can easily be raised substantially without your consent instantly shooting a shotgun hole through your cashflow