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Okay, so a few years ago I bought a condo for $245K in one of the most desirable locations in the county, convenient walking distance to the largest employer in town and also walking distance to a bank, supermarket and shops. The condo has since appreciated to $345K, so an increase of around $100K.
I recently refinanced the condo from a 30-year fixed at 4.675% to a 15-year fixed at 3.375%. It's a significant savings in interest over the life of the loan and I would have some peace of mind from having the property paid off by the time I retire. The condo is one of the few that doesn't really have an owner to tennant ratio to deal with when considering to rent out your unit, so I should have no problems renting it out at local market rate for a comparably equipped apartment in my area (although had I kept my 30 year fixed with higher interest rate). I have $180K left on the mortgage.
Currently, there is another unit up for sale in my condo community. It's the same floor plan. The asking price is $339K. I'm wondering if it would be a good move to get a 30-year fixed mortage at today's low interest rates of about 3.00%, putting up a minimal down payment, to finance a 2nd condo of the same floor plan, and rent that one out. I would be able to rent it out for either the local apt market rate or up to $200 less even.
That could leave me with 2 mortgages totaling about $440K in debt.
The condo community here is unique in that there's no real stringent owner to rental ratio, as far as I can tell, so I could rent to anyone at any time.
Would this be a good move? Or would better moves be to either:
a) Keep existing condo but don't buy another, in order to minimize exposure to risks inherent to condos (it could go under litigation at some point in the future, making it harder to sell). Instead, purchase a house as my 2nd property, then rent out the condo and move into the house. A house the size of what I'd want and expect would be in the $550K range, and I would only be able to put about 10% down, at most, so my total mortgage debt for one condo and one house would be higher than the $440K debt if I were to own 2 condos instead (probably $690K instead of $440K total mortgage debt).
b) Sell existing condo and buy a nice single house instead.
c) Keep existing condo and don't buy another property right now due to prices being high (even with the low interest rate right now).
It's hard to say what I would do without knowing more information. How much would be my annual income from my job(s)? What is the most mortgage payments I could afford monthly? So when your rental unit is vacant, can you afford to make the mortgage payment, property tax, insurance? Have you ever been a landlord? Is this something you might be interested in doing? You're looking at the finance aspect to rental properties, but you need to make sure you have the finances to support a rental. Are you handy and able to fix issues that can arise or know a handyman? Do you want to live in a condo or do you want a SFH?
So without knowing this, I would stick with the current condo and not get a rental property.
I miss having my 3 rental condos in San Francisco. I sold them using the 2 out of 5 year tax exemption since my husband’s salary was low and we had kids and expenses - but so wish held all of them. My rents coming in today would be over $10k/mo. I owned them free & clear paying the mortgages off early, purchased in areas no one wanted downtown and Mission district, paid very little, renovated, then everyone wanted to be there. Rental open houses were crazy with applicants. Prop 13 kept my taxes very low.
So I say if you have both buying power AND holding power, buy another if you can. Condos are good for rental properties since less upkeep. My rule of thumb - property you would be willing to live in yourself, easy to resell at least for what you paid if have to, and easy to rent. Always check rental restrictions with HOA first.
I almost bought a property a few months back, and it was on the Never Can Rent list with the county - deed restricted! Broker and seller knew and did not disclose - the “unknown” box was checked - liars. Wasted money on an inspection and backed out of deal based on inspection and deed restriction.
Good luck!
Last edited by PacificaViews; 07-06-2020 at 04:30 PM..
Okay, so a few years ago I bought a condo for $245K in one of the most desirable locations in the county, convenient walking distance to the largest employer in town and also walking distance to a bank, supermarket and shops. The condo has since appreciated to $345K, so an increase of around $100K.
I recently refinanced the condo from a 30-year fixed at 4.675% to a 15-year fixed at 3.375%. It's a significant savings in interest over the life of the loan and I would have some peace of mind from having the property paid off by the time I retire. The condo is one of the few that doesn't really have an owner to tennant ratio to deal with when considering to rent out your unit, so I should have no problems renting it out at local market rate for a comparably equipped apartment in my area (although had I kept my 30 year fixed with higher interest rate). I have $180K left on the mortgage.
Currently, there is another unit up for sale in my condo community. It's the same floor plan. The asking price is $339K. I'm wondering if it would be a good move to get a 30-year fixed mortage at today's low interest rates of about 3.00%, putting up a minimal down payment, to finance a 2nd condo of the same floor plan, and rent that one out. I would be able to rent it out for either the local apt market rate or up to $200 less even.
That could leave me with 2 mortgages totaling about $440K in debt.
The condo community here is unique in that there's no real stringent owner to rental ratio, as far as I can tell, so I could rent to anyone at any time.
Would this be a good move? Or would better moves be to either:
a) Keep existing condo but don't buy another, in order to minimize exposure to risks inherent to condos (it could go under litigation at some point in the future, making it harder to sell). Instead, purchase a house as my 2nd property, then rent out the condo and move into the house. A house the size of what I'd want and expect would be in the $550K range, and I would only be able to put about 10% down, at most, so my total mortgage debt for one condo and one house would be higher than the $440K debt if I were to own 2 condos instead (probably $690K instead of $440K total mortgage debt).
b) Sell existing condo and buy a nice single house instead.
c) Keep existing condo and don't buy another property right now due to prices being high (even with the low interest rate right now).
What would you do?
We need more info. Do you want/need a house? Are you married, single? Can you afford to carry the payments for a few months if they tenants don't pay?
Do you know some places are trying to pass legislation to get rent free for a year? How would you handle that?
Are far as the above highlighted, you better know for damn sure about that policy before you buy another unit. I don't think it's a bad idea to rent. These unprecedented mortgage rates make it much easier to do it.
Numbers aside, how badly do you want to be a landlord and deal with tenants? One bad one may not be worth any money.
This. On paper, the income from being a landlord may look appealing, but unless you're really into that sort of thing, it can be a nightmare. Bad tenants, repairs on two units instead of one, chasing payments and/or vacancy, and increased taxes (depending on where you live) and insurance can eat into that money. And, what you do make is taxed as income, so there went another 25-30%.
If you want to get into the landlord business, it may be a good opportunity. If you think it's a way to subsidize a second condo easily, be very, very wary and do a lot more research before you decide.
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