Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Opening an old forum...
Parentologist gave a very detailed lesson..thanks,
My brother in law is here from Germany and wants to invest some money in rental property. Obviously he wants to partner with me since I stay here and can take care of paper work locally.
Is there any sense in investing in rental condo? Say we are getting a condo in Simsbury area for around 150K which can give rental 1500-1600 per month (it is already on rent for 1600). Taxes about 4K a year. Association fees 300/month. What should be our approximate calculations while buying a condo for rental investment. I guess investment in home would be more profitable, but buying a condo can take away a few hassles of taking care of lawn, etc. Important to mention that we are not handy men..and cannot do small handy man job ourselves..a basic requirement to own a rental property as mentioned by Parentologist.
Opening an old forum...
Parentologist gave a very detailed lesson..thanks,
My brother in law is here from Germany and wants to invest some money in rental property. Obviously he wants to partner with me since I stay here and can take care of paper work locally.
Is there any sense in investing in rental condo?
What should be our approximate calculations while buying a condo for rental investment.
I guess investment in home would be more profitable, .
Any suggestions?
A home ends up costing more money just because you're not actually receiving income from it. Meaning... Buying a Home and living in it you will pay for all the maintenance and expenses anyway from your own pocket....buying a condo and renting it, at least you have income from it.
Obviously you want to crunch the #s where you are not at a loss with the rental. If the place is new then you can actually even be close to even at the end of the month without worrying about too much maintenance.
Even like annual cleaning of the A/C and heating system will cost money so you want to make sure there's a little extra profit each month as a cushion for the unknowns..
But all in all ... An investment is just that ... an investment. It's not a day trade type of transaction.
Just 15 tenants, each that stay 2 yrs, and the mortgage for the condo is paid off. All you had was maintenance throughout the years and nothing from your own pocket put into the mortgage payment. After 30yrs its paid off so in 2045 you can sell it for the same price as in 2015 and put $150,000 in your pocket (minus taxes, fees, ect of course). But most likely it will be worth more than that so all that money is yours and you didn't pay anything towards the mortgage each month.
And ... even if you have to pay an average of $100 a month on the condo for maintenance ($1200/yr) or vacancy ... that's part of the "investment". In the end you will appreciate it and realize the expenses and losses within the year was small compared to the sell price after mortgage is paid off....
Also ... think of the investment as you are providing a home and a roof for someone that needed it while making sure you are around to support their issues or needs. In return you hope they appreciate that as well. A Mutual respect.
I appreciate your response....
One thing that bothers me is that I have always seen the condo rates going down...I have yet to see any person who bought condo and sold it at a higher price..
Also, much of the profit is gone in the association fees, a cost that in a house the snow/ lawn is generally taken care of by the renters.
I appreciate your response....
One thing that bothers me is that I have always seen the condo rates going down...I have yet to see any person who bought condo and sold it at a higher price..
Also, much of the profit is gone in the association fees, a cost that in a house the snow/ lawn is generally taken care of by the renters.
With mortgage interest rate low, nows the chance. The association fee SHOULD NOT come out of your profit. That should be factored into the #s with rent covering it. If it doesn't, move on to another condo.
Forget the value...Like I said.. it's an investment... not a flip. If value is a concern to you, then get into the business of flipping. Find a fixer upper or foreclosure, get a good deal, fix up, sell. I have bought and sold condos all for profits but that was during and at the peak of the boom..
Also like I said.. What are the chances the condo is worth less in 10 or 30 yrs? If you plan on holding it for less than 5-8 years I say forget it. Not worth the hassel and headaches.
Good luck. It's fun...if you like that kind of stuff.
Oh... please make sure the condo's allow renting. Sometimes if more than 40% rentals in the association they wont allow you, nor will the bank give you a loan for it.
Another quick tip... When getting a loan for this condo, say it's a primary residence, live there for 2 yrs, then rent it out after that 2yr mark, then when you go to sell it, you don't have to pay investment taxes on the profit since it was a primary.
Nice...Thanks for encouragement. You probably guessed it that I am feeling hesitant...first time venture.
But no chance of living in the condo..We bought our big house (4BR) last year...and are very happy in the town with schools. If at all we plan to move from our house..it will be for a bigger house in future..once our jobs are established.
We are still in our fellowship/ training years for another 2 yrs (before we become practising physicians).. this condo thing came up since my brother in law wanted to invest and I also saved some money..
As for investment taxes on the profit...I will unfortunately have to bear it...though I dont anticipate much profit on condos in general. Even if the prices of condos increase in 5-7 yrs, that is partially offset by the older age of the condo.
Opening an old forum...
Parentologist gave a very detailed lesson..thanks,
My brother in law is here from Germany and wants to invest some money in rental property. Obviously he wants to partner with me since I stay here and can take care of paper work locally.
Is there any sense in investing in rental condo? Say we are getting a condo in Simsbury area for around 150K which can give rental 1500-1600 per month (it is already on rent for 1600). Taxes about 4K a year. Association fees 300/month. What should be our approximate calculations while buying a condo for rental investment. I guess investment in home would be more profitable, but buying a condo can take away a few hassles of taking care of lawn, etc. Important to mention that we are not handy men..and cannot do small handy man job ourselves..a basic requirement to own a rental property as mentioned by Parentologist.
Any suggestions?
I'm not a landlord nor have I ever been one. I think Cambium and Parent have given some good advice here though. I would add that I think the holding period is 3 yrs not 2 yrs as Cambium pointed out. One issue with that though is the condo's bylaws or percentage of rentals could change in the 3 yr holding period possibly leaving you with a condo you can't rent.
Given your parameters and under the best of circumstances I don't think buying and renting out a condo would be a wise investment. Now if you could buy multiple units and/or buy in a low income area I think there is money to be made.
Another thing is that as a landlord if you can't fix minor things you will be eaten alive by handyman and/or contractors. Even something simple like replacing a toilet is going to cost you $200-$300 dollars. As a homeowner myself I learned this very quickly. I've had 3 handyman to my house on various projects and all of them have given outrageous prices on the simplest things, so I said no to all of them and did the work myself.
For example, hanging an interior door $175. I can buy the tools and 3 doors for that price and still come out ahead. If they are getting prices like this I should start an interior door hanging business. I would make more doing that than at my regular job. I suppose if the prices are that high - someone is paying that - and I wish they would stop because it's ruining it for everyone else.
Lastly, interest rates for investment properties are going to be double conventional 30 yr fixed rates. Currently, that would probably be 7.0%-9.0% and the bank will want you to pledge personal assets as collateral even if you have excellent credit.
You and or your brother would do better investing in the US stock market. I would suggest index funds via Vanguard or perhaps Fidelity. I suggest Fidelity because they have a credit card that will give 2% of your purchases back into your investment accounts(s) I think the limit is 500$ per year though.
It can be problematic for non US citizens to invest in the US stock market and or US mutual funds but it can be done. First your brother will need a TIN tax payer identification number. Then I believe all dividends and capital gains distributions from US sources will have 30% taxes with held from them. Only way to get some or all of that 30% tax back is to file a US tax return. That will probably alert Germany too since I'm sure both countries share tax info.
It would probably be easier for your brother to invest in the London stock exchange (FTSE index for example) or even the German stock exchange. It would certainly cut down on paper work.
I'm not a landlord nor have I ever been one. I think Cambium and Parent have given some good advice here though. I would add that I think the holding period is 3 yrs not 2 yrs as Cambium pointed out. One issue with that though is the condo's bylaws or percentage of rentals could change in the 3 yr holding period possibly leaving you with a condo you can't rent.
Given your parameters and under the best of circumstances I don't think buying and renting out a condo would be a wise investment. Now if you could buy multiple units and/or buy in a low income area I think there is money to be made.
Another thing is that as a landlord if you can't fix minor things you will be eaten alive by handyman and/or contractors. Even something simple like replacing a toilet is going to cost you $200-$300 dollars. As a homeowner myself I learned this very quickly. I've had 3 handyman to my house on various projects and all of them have given outrageous prices on the simplest things, so I said no to all of them and did the work myself.
For example, hanging an interior door $175. I can buy the tools and 3 doors for that price and still come out ahead. If they are getting prices like this I should start an interior door hanging business. I would make more doing that than at my regular job. I suppose if the prices are that high - someone is paying that - and I wish they would stop because it's ruining it for everyone else.
Lastly, interest rates for investment properties are going to be double conventional 30 yr fixed rates. Currently, that would probably be 7.0%-9.0% and the bank will want you to pledge personal assets as collateral even if you have excellent credit.
You and or your brother would do better investing in the US stock market. I would suggest index funds via Vanguard or perhaps Fidelity. I suggest Fidelity because they have a credit card that will give 2% of your purchases back into your investment accounts(s) I think the limit is 500$ per year though.
It can be problematic for non US citizens to invest in the US stock market and or US mutual funds but it can be done. First your brother will need a TIN tax payer identification number. Then I believe all dividends and capital gains distributions from US sources will have 30% taxes with held from them. Only way to get some or all of that 30% tax back is to file a US tax return. That will probably alert Germany too since I'm sure both countries share tax info.
It would probably be easier for your brother to invest in the London stock exchange (FTSE index for example) or even the German stock exchange. It would certainly cut down on paper work.
As a landlord who has a property in Wilton but lives in Canada, I can attest to the ridiculous labor cost of handyman in ct. I am blessed to have a tenant with handy skills and a Guatemalan handyman who charges me still expensive but not obsecene prices. I'd very much prefer to lease my property to the right tenant at slightly below market price.
Another thing is that as a landlord if you can't fix minor things you will be eaten alive by handyman and/or contractors.
10000% agree. I never believed in long distance property investing mostly for that reason. UNLESS it's such a great deal that the rent will give you that profit cushion for those moments you need it. But yeah, if its local or even an hour away, you better know how to fix a few things otherwise those costs will run up! Even a simple thing like annual maintenance on Air Conditioners. Anybody can buy a filter or clean dust off the condenser. Just learn what else is involved and do it.
The Air Handler was leaking water AND the dryer broke in my rental... I fixed them both.. Saved over $400. That's when time shouldn't become a factor, it's the money that you invested into the property in the first place, not to have more time. So fix it, save it, and keep more of it. If you're not handy, you better have some luck on your side..OR invest in a new property built after 2005
10000% agree. I never believed in long distance property investing mostly for that reason. UNLESS it's such a great deal that the rent will give you that profit cushion for those moments you need it. But yeah, if its local or even an hour away, you better know how to fix a few things otherwise those costs will run up! Even a simple thing like annual maintenance on Air Conditioners. Anybody can buy a filter or clean dust off the condenser. Just learn what else is involved and do it.
The Air Handler was leaking water AND the dryer broke in my rental... I fixed them both.. Saved over $400. That's when time shouldn't become a factor, it's the money that you invested into the property in the first place, not to have more time. So fix it, save it, and keep more of it. If you're not handy, you better have some luck on your side..OR invest in a new property built after 2005
Or take classes to be handy
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
