Investor · New York City, NY · Member since 2017 · 13 posts · 2 votes
This is my first post so please be bear with me:
I own a co-op in NY and have been renting it out. The numbers: Mortgage – $1580 Maintenance - $1,462 Sublet Fee - $281 – so it costs me $3325 a month to keep the apartment. I rent it out for $3,150 a month Therefore, to justify the $175 a month loss – I figure as long as I cover Interest/ Maintenance/ sublet fee it works out. I think of the equity as moving money from my bank account to the apartment. (That I can eventually pull out) Yes, I understand that insurance and other miscellaneous items need to be considered, but I want to keep this simple.) The numbers I use so I do not loss sleep at night: Interest on the mortgage - $705 Maintenance - $1,462 Sublet Fee - $281 for a total cost of $2448 Therefore, I make a profit of $702 a month. Am I just deceiving myself?
Investor · Franklin, TN · Member since 2017 · 112 posts · 77 votes
9y
@Antonio Palumbo I am in a similar situation. We paid retail for a condo where my daughter attends college. We rent two rooms which (depending on utilities each month) can go cash flow negative by about -$100 high end. But we are avoiding paying up to $30,000 in housing costs during her education. Potential small negative cash flow but we went in with our eyes open and if we get no appreciation or even a drop we still gained the value of NOT paying for her housing. We made the decision it was OK. When she graduates we will review and decide if worth keeping or selling and roll that to a different investment.
In another deal we were considering would have been a significant negative cash flow for 8-9 months to co-develop 2 single family homes with the potential of a nice pay-off. At that time we could not swing the negative cash flow and deemed could not take the risk.
With anything just make sure it is a deliberate decision and sounds like you have.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Antonio Palumbo For what it's worth I'm the sucker that pays down his mortgage faster. It's a commercial mortgage and will reset in a few years. I want to make sure that if the market goes side (read: values drop) that I can still qualify for the refinance easily. More cash-flow (at the time of refinance) will be a byproduct of the strategy but it's really a hedge against something going wrong. And if rates are higher at that point (and for some reason rents haven't increased) I want to ensure I can still have positive cash-flow or (at worse) break-even. But, for me, this comes with the territory of commercial full-recourse loans. I have a different perspective when it comes to my personal residence and a 4-unit that's on a 30-year fixed. For those (at the interest rates that I have) I want to stretch those payments out as long as I can. In my opinion, it's "cheap money".
Investor · New York City, NY · Member since 2017 · 13 posts · 2 votes
9y
Hi guys - Not to beat a dead horse but want to update this thread. I asked for an appraisal (Freddie Mac's Home Value Explorer) on this apartment I've owned now for 8 years and the numbers came back as follows: