Thanks so much for all the great thoughts and opinions.
Probably the best thing you could do is elaborate on exactly what you mean when you say ran the numbers, and what about the result made it acceptable.
Right, I ran the $900 and $750 figures through the 50% rule and the 1% rule and they both came out showing a modest profit of around $200 per month at the lowest end, though I'm not sure how well these numbers work when you have to factor in condo fees.
I haven't done a more precise calculation yet because there are still a few variables like what the taxes and insurance would ad up to. Since the bank currently owns the unit, it's a little more difficult to get these numbers and I'll have to go digging if I want to find them.
Much depends on whether taxes are included in the HOA-- that would be uncommon, but just because I haven't seen it doesn't mean such a thing isn't possible.
You're probably right. The only reason I assumed was because I'd seen it once before in the past (or at least I thought I had) and when I I asked another realtor for information regarding a different unit in the same complex, he sent me a spread sheet that included gas, electricity, condo fees, but not taxes or water. I moved forward with the assumption that both were included in the fees, but I'm probably wrong about the taxes. From what I've seen with condos in the city, water usually is included.
The tax rate in the city is 1.5% for residential areas so I would add $75 at most for taxes, assuming the building is evaluated at 60k.
Also, based on your anticipated mortgage, I'm guessing you're running based on mortgage rates for owner occupied rather than investor. Take the consumer rate you think you would qualify for, and then add 1% to get a good approximation of what you may get as an investor-- you might do better, but you might not.
Good point! Hadn't thought of that.
Have you been in the unit to know if it's rent ready, or there would be repairs or improvements necessary, and if so, their costs? What closing cost, insurance, vacancy, maintenance, and reserve numbers are you using? Also good to evaluate with the cost of property management (10% of collected rents usually) even if you plan to do it yourself, as you should figure in the time cost to you, and assure yourself that it would still be a good deal if you move away.
All more good thoughts that would occur to a more experienced investor, but mostly escape the attention of a novice like me.
The place just came on the market so we're going to see it this week, but based on the photos it looks to be in decent condition (carpets don't look overly worn, no holes in walls, everything looks more or less clean.) I'd probably spend a hundred or so freshening the place up, but I'll have to wait until I actually go see it to make a real verdict.
As I mentioned above, I used the 50% rule to estimate vacancy, management and insurance.
For closing costs, I mostly used the figures from when I purchased my own home, so they may be off for a non-owner occupied residence. My estimation was basically this:
Lawyers fees: $1000
Inspection: $350
Land transfer tax: $225
Thanks again for giving me all this information to think about. I'm going to try to get more information about the place when we go to see it.