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Purchased a condo last year. Price was $245K, Appraised for $265K, with Zillow showing as high as $295K value.
2bdrm/2br/1 car garage/1 uncovered reserved parking spot. It's in a desirable city, just a block away from shopping and 2 blocks away from a major high-tech employer that employs thousands of workers. Nearby apartment complexes have rents of around $1700 for remodeled 2bd/2ba/1 car garage.
Intent has been to stay for 3-5 years and if new homes in the area are priced right, I'd either rent out the condo and try to raise a 20% deposit on a new home over the next 3-5 years, or sell the condo and fund the 20% deposit on a new home purchase with the net proceeds from condo sale.
My mortgage, interest, property tax, HOA dues and insurance is $1450/mo total. If I were to rent for $1450 or $1500, I would not be making much if any profit, but a tenant would be helping me build equity that I can one day cash out. At that rental rate, it would save a renter up to $250/mo. If I were to rent the condo at market rate, I could generate up to $250/mo cash flow. Even at the same market price as a comparable apartment, benefits like attached garage and condo vs apartment living may appeal to some and make it worth considering also.
The condo community, like most others, was under litigation but is now out of litigation. It is one of the few condos I have encountered without a strict owner/renter ratio requirement. I know a strict requirement of having more owners than renters is generally more desirable but in this particular area I don't see the community going to crap due to it. It's a pretty quiet and fairly well maintained community.
So I'd be free to rent out my unit, and I can now also freely refinance it (although interest rates have crept upwards which has negated the benefit of refinancing for now; I may have to wait until interest rates are 1% lower than my current interest rate before it is worth refinancing...
If I rent out, I'd have to raise funds for a 20% deposit on a new house in 2 years, plus figure out where to stay for 6 months to fulfill a requirement that I have been renting my condo for 6 months prior to be treated as rental property by my lender, so that my buying power of a new property is higher.
If I sell the condo (which I bought for $245K and appraised for $265K, with comparable units in other condo communities in the area of same approx. sq. footage listing for $20-30K more with detached 1-car garages), after agent fees, I would basically come out even, taking all of my original money off the table, plus maybe a bit of a profit.
Considering the city, the major employers in town and how workers there are, the close proximity to those employers and also to shopping, I anticipate that there'd be decent demand by renters. But I'm not sure if I'd still be better off not incurring the risks associated with renting if I'm not generating any net cash flow more than $200/mo, if that, all to have someone pay down my mortgage and help me build equity.. 30 years is a long time to manage property and many things can go wrong. Maybe cashing out and investing that money elsewhere without such a long-term commitment requirement and greater annual ROI would be better?
Or, would it be better to live in the condo and forgo purchase of a new home? I could use an extra 1-2 bdrms, and it'd be nice to have a 2+ car garage and also a yard, and not be connected to 2 other condo units, but I can't say it's a necessity for me to have those things. Another nice-to-have is a bdrm downstairs on ground floor. With the condo, bdrms are all upstairs. Forward looking, one family member is a senior and eventually may need to live on ground floor. That would probably be the more important long-term consideration. But maybe THAT money towards the down payment of the new house could be applied elsewhere. The mortage would be about $1000/mo more if opting for a house of the type I'm targeting, vs staying in current condo. So that's another $12K/year of money that could be invested elsewhere as well...
Purchased a condo last year. Price was $245K
My mortgage, interest, property tax, HOA dues and insurance is $1450/mo total.
If I were to rent for $1450 or $1500...
If I sell the condo..., after agent fees, I would basically come out even...
Or, would it be better to live in the condo and forgo purchase of a new home?
What say you?
Unless there is some NEED to leave the area... stay put.
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