I am interested in getting into real estate investing and not exactly sure where to start. I bought a 1 bedroom loft in Orange, CA in 2008 for a great price. I put in a lot of top notch upgrades to make my loft Dwell Magazine ready. I refinanced about 6 months ago to a 10 year fixed conventional loan at 2.75%. So I only have 9 1/2 years left and the condo will be free and clear except the HOA monthly dues of $310.
I only owe $132,000 on the loan and a neighbor sold the same exact condo for $310,000 in April. The condos have been going around $268,000 and up.
My real estate agent said whatever I do don't sell it because I would make way more money in the long run by renting it out. I want to know if it makes more sense in selling it and making a $150,000 profit and divide that $150,000 and put it on two 2 bedroom condos and live in one and rent out the other or keep my condo for the next 9 1/2 years and have it free and clear and occupied by tenants. If I do keep it and start having a tenant rent it out how do I get a down payment for another property to live in now that I have a growing family.
All of the podcast interviews are with rental property owners in Iowa, Michigan, and North Carolina where it's normal to find properties for $50,000. Out in Orange County and LA County 1 bedroom condos in bad neighborhoods still go for $250,000. So I am lost on how to get started.
Whether or not you decide to sell or rent depends on your goals and on the numbers. Run them. BP has a tool that allows you to do it for rental properties. Additionally, what's the typical rent in that area? Rentometer may be in the ballpark.
You might want to sell, you might not. We've got a 2/2 condo in RSM. We could sell it for far more today than when we bought it a couple of years ago, but the rent's barely gone up. Our taxes have, but we're looking at appreciation. We usually clear $300-$400/mo. after all's said and done.
We sold another condo in Stockton. The HOA was way too high. Condos are tricky over the long run because you never know what's going to happen to the HOA fee. Your condo's fee is not always going to be $310. Your condo association may not always be solvent.
Since you mentioned buying two condos (and I assume that means with 2 mortgages) and having your family live in one, perhaps you should consider house hacking. Would be difficult considering SoCal prices, but you never know. The IE is obviously less expensive than OC, but prices still have shot up over the past couple of years. It may not even be an option for you.
Thank you, for your feed back. I did not know that BP had a rental property tool. I will use that to see what makes more sense financially with that tool. Thank you!
Alan what could you rent the condo for?
I could rent it out for about $1,500 a month
it all depends on whether you want to get phone calls for repairs or not. I would sell owner financed, down payment and cash flow from difference between payments.
Hey Alan! Well the first question is--how much would you be able to get in rent for that condo? We'd have to figure out if you are cash-flowing or not. Next I would assess future appreciation potential to know what it looks like there. Depending on the answer for those two things, then you can better assess whether to sell or keep it and keep renting it out.
I live in LA and have always invested elsewhere for the exact pricing reasons (and therefore returns reasons) you mention.
Shoot me some numbers and I'm happy to help!
Alan, I'm sure you realize yours is a pretty good decision to have to make. You might want to look into pulling some equity from the condo and using that as a down payment for your own home then renting out the old one.
I had a similar situation a few years ago where I had improved the value of my home and had the rent/sell dilemma. An investor came by and made an offer but once I had his estimate I was able to talk a bank into giving me 75% of that as a cash out. Long story short, the original house has been renting steadily along and I have two more rentals that I've purchased with the money from the cash out.for
Ali and Brian, thank you for the advice. I will look into both your ideas.
I wouldn't rent it out. It sounds like you'll be losing money every month or breaking even before repairs with a $132K mortgage and $300 HOA dues. First time something needs a repair or a tenant quits paying rent, you're screwed. I wouldn't invest money on the east coast no matter how cheap it is. Invest someplace close so you can drive by and look at the property on occasion, it will also keep the property manager honest. I've seen too many "California investors" get taken to the cleaners by crappy PM. Take the money from the sale, go buy a duplex, live in one side and rent out the other until it gets moving good, then buy a house to live in.
it all depends on what you can qualify with your 150,000 down. A 1 bed loft was a good start. It also depends on where you are in your life now single versus putting down roots. If you can comfortably afford to buy duplex or house/ condos with more rentable rooms that cash flow Alta decent price then you must pencil that in too. Being an absentee owner landlord is not fun