Advise on my first Condo purchased

Starting Out
8yFollow

Advise on my first Condo purchased

Julian Ramirez luna
Beverly, MA · Member since 2018 · 19 posts · 4 votes

Hello Everyone,

I Just wanted to get some advise on a recent move that I did to see if it was a good move or not, and if it was not a good move, can you give please some advise for the future.

In June, I bought my first property as my primary residence in Beverly MA, a few weeks after I bought my unit, I got a job opportunity to as a tennis coach, close to the area and in the job they included free housing. so I don't have to pay anything for rent, so I decided to rent my unit, but I am renting it in $1800 a month, but all my expenses are $1910, so that means that I am $110 Negative cash flow a month. What I see good from that, is that I don't have to pay anything for rent, the tenant is paying months of my mortgage payment and I am being able to save more money now to buy some more properties that could help me get some cash flow. I also started a tennis academy by myself, so I am planning to offset part of the taxes from the interest that I am paying for the loan. 

I have a lot of free time in my new job and I want to get more into the real estate business, so any recommendations on what steps I should take now to get more involved in it. I am thinking of start using roofstock.com to buy a rental property. does anyone have some comments about that.

Thank you for the construction feedback,

Julian 

0Reply
21 views

6 Replies

Jump to latestLatest
  • Julian Ramirez luna
    OP
    Beverly, MA · Member since 2018 · 19 posts · 4 votes
    8y
    @Julian Ramirez luna
    0Reply
  • Account Closed
    Rental Property Investor · Beverly, MA · Member since 2018 · 41 posts · 16 votes
    8y

    Hey Julian - Welcome to Beverly!  It's definitely a city that has been booming recently.

    When you say your expenses per month are $1910, is that PITI (Principal, interest, taxes, insurance), and HOA fees combined? Any idea what the HOA fees cover? ie do you have to pay any extra for maintenance/capital expenditures? (I'm not the most familiar with condos)

    You are self managing I imagine?  Do you have a contingency for vacancy (with the demand in Beverly, it doesn't have to be very much, but you should still have some).

    These are all things that investors on here think about when weighing the costs and benefits of a property. Factoring other "hidden" expenses like vacancy (when you don't have a tenant in there, you'll be paying the PITI and HOA!), maintenance (beyond what the HOA covers), and property management (if you ever decide to no longer self manage) - you may be losing more money than it initially appears.

    HOWEVER, the Beverly area is on fire right now, it is completely possible that property values will continue to climb quickly, and you could exit your condo in ~5yrs and make a nice profit (keep in mind you'll have paid closing costs once as a buyer, and once as a seller at this point, which will really eat into the profits if, say, you bought at $250k and sold for $300k - not a straight $50k profit, plus you had negative cashflow over the years too).

    So... I'm not sure, I suppose it depends on what that $1910 number includes.  If it includes everything, including contingencies, I might hold onto it considering the market - still a risk though.

    If it doesn't include any of that extra stuff, I would strongly consider exiting the property somehow.

    Run the numbers, see what the return on your investment is.  You put X down, the tenant pays down X principal a year, and you lose X per month in negative cashflow.  Then you've got tax benefits and potential appreciation to look at.  If you can find a better place to put your money, then get it out of the condo, if you think you're happy with your return then keep it.  Or not, it's up to you.

    Oh, and an added benefit of keeping it is that it's your first investment and it will be an excellent learning opportunity!  This does have value as well.

    Hope this helps!

    Blake

    0Reply
  • Julian Ramirez luna
    OP
    Beverly, MA · Member since 2018 · 19 posts · 4 votes
    8y

    Blake, Thank you for your advise.

    So, the PITI and the HOA fee is included in the $1910, also the landlord insurance. Since this is my first property, I have been learning a lot of things in the process and I think is has a lot of value. I am living in Weston area now, and the average to rent a place here is about $1800-$2000, but I am not paying any money for rent now because it is included in my new job, which before I was on a W2, but now I am self employed running my own tennis academy. So I think that I will have some good tax benefits keeping the apartment, even though I am having negative cash flow from the property. The good thing with this move, is that I am saving about $1600 a month just for the rent that I am not paying, plus the tax benefits that I will be getting and the learning experience.

    I am going to be able to save more money soon to buy a property that can have positive cash flow. what do you think about my point of view?

    Thank you for your comment.

    Julian

    0Reply
  • John Mocker
    Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    Julian,

    Since you have gone from an owner occupied unit to a rented unit you may have to change the Insurance policy.  We represent dozens of companies and most will not cover a rented condo unit on the Condo form of the Homeowners policy.  If your company does not, then you need to switch to a Dwelling/Fire form.   I said "If" because there are some companies that do use the same form for both rented and owned condo's.  I would call your agent to make sure that the coverage is now correct.

    Good Luck on the Tennis Academy.  Feel free to PM me if you have any questions on or problems getting coverage for the Academy. 

    0Reply
  • Account Closed
    Rental Property Investor · Beverly, MA · Member since 2018 · 41 posts · 16 votes
    8y

    @Julian Ramirez luna

    Thanks for the info, it looks like with other contingencies added you'd be negatively cashflowing more than the $110/month it appears right now.

    Although you are not paying rent right now, this does not justify a negatively cashflowing property.  The money you are spending on the condo per month plus the negative cashflow likely could be better invested somewhere else.  If you're in Weston now, the 'boroughs and Worcester are just as close and there are more deals to be found there for sure.

    The upside of the condo right now is appreciation, and that would be too risky for me.  Without appreciation or cashflow, all you're getting is some principal paydown and tax benefits - likely not justified.  Betting on the appreciation is speculation btw, not investing - although lots of people do that (didn't end well for people in 2008 though).

    My .02c

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free