I'm trying to determine if the buying of a rental property could make sense for me. I appreciate your input greatly! Thanks!
Comp: Two very similar condos sold in the past 30 days. One at $500k. The other at $490k. Both were renovated and repaired before being sold. Looked really nice at selling time.
The owner is willing to sell this condo to me at $415k as-is. No renovation, no repairs. Looks very decent though. No major repairs needed. Just needs a new AC and heater, fresh paint. Kitchen is decent. Bathrooms old, but, work ok.
- I'd put 20% down: $83k
- Closing costs: I think they would be lower than normal, because this would be a seller-buyer transaction, no agents involved, no bank involved. Seller financing.
- Interest rate at 4%.
- Property manager rate: 7.16%. The thing is I'm now relocating far away.
- Cash flow would be negative: -$16.90
- The other option I'm considering is to buy it and flip it. Although I've never flipped a house and I don't know if the profit, if any, would be worth the effort.
- Schools: Good to average. Decent overall.
- Near a lot of workplaces, parks, libraries, malls, etc.
- 30-40 min from the beach.
- If I did not have to relocate this would be a no brainer. As I looked for something like this for the past year.
- There's also a high probability that I return to this area in 2 or 3 years.
Here are questions to consider...
How is the HOA? Are they funded or are there plans to do an assessment soon? How much would you need to put in to make it rent ready? How much would you put in to make it work 480-500? How is the market in 2-4 years (bring out your crystal ball for that one)? How long will the seller finance for? How is the rental market there?
Based on what you did share, If you already owned it, I would say to keep it. But I think you might do better w/ your money with other properties. Please remember, this is a business and you're not playing w/ monopoly money.
Thank you Josh for your response !!!
I do not own the property.
I agree with your overall conclusion that it is a bad deal.
However, my wife is now very emotionally attached to this rental property. She's actually pressuring me to buy it despite I having showed her that the numbers do not add up.
She tells me to buy it despite the loss, that I paying less rent in the new city will offset the loses in this rental. I don't know whether to cave in and please her or stand firm. I think I'd be buying very close to the peak of the market as well.