2/2 Condo (future rental) in good school zone - AL
Hi All,
Went to see a condo this weekend. After mulling it over, made an offer, but I can't get the seller to come down quite as much as I'd like. Thought I would run it by people with more experience and see if you think it's worth it. Listed at $85,000.
~1100 sqft, 2 bed, 2 bath condo - class A-B neighborhood (middle-upper class, good schools, higher value homes).
Current owner bought in Sept 2015 for $67,500. They painted the interior and updated the floors to a high quality laminate. Real estate agent guessed they probably spent ~$8k on upgrades.
Building is in good condition - roof replaced within the past 10 years, nice brick exterior, pool is in good shape. Interior needs some updating. From what I saw, it needs new counters and cabinets in both bathrooms, new counters in the kitchen, a new oven/stove, and a washer/dryer connection added. I will look through the HOA information tomorrow, including their latest assessments and reserves, etc.
A comparable condo on the same street (same complex) sold for $72,000 within in the past 12 months. Overall, it was pretty similar but had a newer kitchen and washer/dryer connection.
My starting offer was $70,000 on recommendation from my real estate agent, who owns a couple of condos in the complex. After a couple of back-and-forth offers, seller countered at $78,000. My latest offer was $78,000 if they added a washer/dryer connection, otherwise $77,000. Seller held firm at $78,000 and said they would not install a washer/dryer connection.
I think the rent in this area for a 2 bedroom is between $900 and $950/month. HOA fees are $230/month and include water, sewer, pest, trash, and landscaping.
With that in mind, I am currently looking at:
$900*12*.5 (rent for a year - 50% expenses) = $5400
Realistically though, income would be $900/month and expenses, when I decide to move out and rent through a management company in a couple of years, would be as follows:
Vacancy: $45 (5%)
Repairs: $45 (5%)
CapEx: $45 (5%)
HOA: $230 (26%)
Insurance: $50 (6%)
P&I: $289 (32%)
Management: $90 (10%)
Property taxes: $56 (6%)
Equaling $850/month
My total investment would be $20,600 ($15,600 for the condo and ~$5,000 for upgrades - I'm guessing on the costs).
Cap rate of 4.79%.
Cash on cash return of 2.91%.
I would not rent out right away. I would live there for a couple of years on my own. My hesitation is that I might be paying more than I should at $78,000.
Thoughts?