MrNewEngland
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Location: The QC
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I bought a condo in 2003 in the downtown area of my city and have been living there since. I mainly bought it as an investment (although I really wanted to live there too)... but it hasn't panned out the way I thought. I paid $130K in 2003 and zillow now estimates it at $133.5K. Not the ROI I was hoping for.
Whatever, I guess it could be worse: someone bought a condo a few floors down from me with the same floorplan in 2008 for $180K - just before the crash. I've watched the value of that condo skyrocket and plummet in he time I have lived there.
Anyway after 10 years I feel as though I have outgrown the condo. After looking for several months I found a house I absolutely loved. It's in a transitional neighborhood just outside the cities "historic and arts district". I think I slightly overpaid for it but I think the area is going to become very nice. It's between the arts district and one of the most desirable areas in the city.
My plan is to rent the condo out - I don't think I can make much in rent but I feel as though I am better off renting it out and hopefully letting it appreciate than selling it and barely making anything.
So this thread was mostly because I am excited but also looking for advice. Advice on anything. From renting the condo to owning an old house. To a house warranty (what is that?) that was offered.
I'm nervous to have this much money in debt with the two mortgages.
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Mon Jan 13, 2014 7:20 pm |
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littleroc02us
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I myself am getting involved in rental properties. Hope to buy one very shortly that I have an offer out on. I have done a ton of research on my area and the mathematics on the cap rate, cash on cash and cash flow returns. Plus I know the area like the back of my hand, so I feel like it's a property that will give me 1% cash flow monthly after expenses and good appreciation in the future.
So one bit of advice I may give you is there is a simple formula that you can use to figure out if you'll have any cash flow from this property. It's called the 50% rule. So you take your projected operating expenses, not including mortgage and interest. So what you have left is considered your cash flow. This is just a quick way to judge a worse case scenario of what your properties projected income might be. This is a basic calculation, I can more into detail with more advanced formula's that I use to analyze properties if your interested.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Jan 13, 2014 7:32 pm |
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MrNewEngland
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quote:
Originally posted by littleroc02us
So one bit of advice I may give you is there is a simple formula that you can use to figure out if you'll have any cash flow from this property. It's called the 50% rule. So you take your projected operating expenses, not including mortgage and interest. So what you have left is considered your cash flow. This is just a quick way to judge a worse case scenario of what your properties projected income might be. This is a basic calculation, I can more into detail with more advanced formula's that I use to analyze properties if your interested.
Please do. I'm not really 100% following this paragraph...
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Mon Jan 13, 2014 8:00 pm |
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littleroc02us
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Cash: $ 384.35
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50% rule for the purpose of seeing whether or not it will cash flow.
example: Single family home paid 100k
Taxable Monthly rent: $1400.00
50% rule (operating expenses): -$700.00
Mortgage and Interest: -$600.00
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Cash Flow $100.00
This is a simple formula for figuring out if a property might generate cash flow.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Jan 13, 2014 10:01 pm |
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Wino
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One other thing is that I wouldn't trust Zillow for any estimates. They have my house going for significantly less than lot value, for instance. I think that Zillow doesn't have a clue when it comes to valuations. If you want an estimate, then bring up recently sold houses on Trulia. At least then you're looking at similar numbers.
Better yet, find a realtor and ask him to do comparable houses that have sold. They have access to the MLS, which will list sold-for price. If you find out that the condo is worth $160K or more, you may decide to sell instead of renting it.
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Tue Jan 14, 2014 2:48 am |
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MrNewEngland
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I appreciate all the thoughtful replies.
My condo won't cash flow now but I knew that going in to it. It's the taxes and COA dues that kill me. But I think the 50% rule is a little high in this case for operating expenses. I have no yard, roof, or exterior to maintain. It's a fairly new building (it was brand new when I purchased it) and I haven't had any issues.
Problem is that the market is still depressed in the downtown area in my city because during the boom a LOT of condo buildings were built and the market was flooded. Then when the economy tanked it hit this city pretty bad because banking is a huge part of our economy (Charlotte, NC). The economy has come around now but there's still a lot of condos available from the boom.
It's kind of hit me today and I am pretty nervous going into this. I need to get organized.
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Tue Jan 14, 2014 1:45 pm |
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littleroc02us
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Yes, condo's with HOA fees can take a chunk out of your profits for sure. Another quick way you can figure the math is to do something like this:
This is just an example.
Rental income amount = $1,400
HOA -$300
Mortgage and interest -$600
Insurance -$70
PMI -$100
Water and sewer -$100
Maintenance cost -$150
Vacancy rate 8% -$100
PM fee of 8% -$100
Cash Flow = -$120
So as you can see the expenses can eat up your monthly income.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Tue Jan 14, 2014 5:08 pm |
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MrNewEngland
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Location: The QC
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quote:
Originally posted by littleroc02us
Yes, condo's with HOA fees can take a chunk out of your profits for sure. Another quick way you can figure the math is to do something like this:
This is just an example.
Rental income amount = $1,400
HOA -$300
Mortgage and interest -$600
Insurance -$70
PMI -$100
Water and sewer -$100
Maintenance cost -$150
Vacancy rate 8% -$100
PM fee of 8% -$100
Cash Flow = -$120
So as you can see the expenses can eat up your monthly income.
I'm thinking it'll look something close to this:
Rental income amount = $1,000
HOA -$200
Mortgage and interest -$530
Insurance -$25 (it's low on a condo - some in COA dues)
PMI -$none
Water and sewer -$incl in COA dues
Maintenance cost -$150 (I can't imagine this be accurate. I've never put $2K a year into the condo top maintain it.)
Vacancy rate 8% -$100
PM fee of 8% -I plan to do the management myself.
Cash Flow = I expect my cash flow to be about zero and possibly lose $50 a month. I see this as being worth it because I expect the market to bounce back.
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Tue Jan 14, 2014 6:36 pm |
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littleroc02us
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Just remember to expect the unexpected. Have cash set aside for expenses such as the furnace going out, the fridge dying, the water heater leaks and floods the floor and ruins the carpet. Good luck and I hope the housing market continues to go up.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Tue Jan 14, 2014 8:33 pm |
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MrNewEngland
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Cash: $ 20.85
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Location: The QC
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quote:
Originally posted by littleroc02us
Just remember to expect the unexpected. Have cash set aside for expenses such as the furnace going out, the fridge dying, the water heater leaks and floods the floor and ruins the carpet. Good luck and I hope the housing market continues to go up.
Thanks. I'm nervous, optimistic, and excited.
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Wed Jan 15, 2014 1:23 pm |
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Fed
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When there is good money, I'm working on such stock exchange and not get bad +) Now the Internet came across a new company that grow marijuana, as well as the United States and is now legalized, it's just a gold mine!www.fvpharma.com
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Wed Jun 18, 2014 1:17 pm |
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