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Started By
Message
Condo as an investment property?
Posted on 5/22/09 at 8:02 am
Posted on 5/22/09 at 8:02 am
So I've been thinking of buying a 2 bed, 2 bath condo later this year for myself and just renting the other half of it out to reduce the cost of living there. I travel a lot so eventually I'd probably just rent out the other room as well. I don't have any property now so I'd be eligible for the 8K tax incentive. I figure since I probably wouldn't be spending more than 150K the 8K could be some insurance against a possible decline in value of the property. (Well only 8K worth of insurance obviously)
Does this sound like a wise idea? Give me your thoughts, concerns, etc...
Does this sound like a wise idea? Give me your thoughts, concerns, etc...
6
Posted on 5/22/09 at 8:14 am to Powerman
Have you looked at how much the rent is for similar condos relative to the cost of purchasing? If it's like 500+ a month difference I might consider it. But you have to remember you live in one of the biggest bubble cities.
Posted on 5/22/09 at 8:16 am to LSUtoOmaha
You don't even know where I live 
Posted on 5/22/09 at 8:18 am to Powerman
I thought you were in Los Angeles?
Posted on 5/22/09 at 8:41 am to LSUtoOmaha
No I'm in South Louisiana now
No way I'd purchase in L.A. right now
No way I'd purchase in L.A. right now
Posted on 5/22/09 at 9:00 am to Powerman
Oh good. I thought you had gone insane there for a minute. Are you in Baton Rouge?
Posted on 5/22/09 at 9:03 am to Powerman
quote:
Does this sound like a wise idea?
in normal times yes, but now? no. Property is still declining in value. You don't want to catch a falling knife.
And they will most likely extend the $8k into next year.
Posted on 5/22/09 at 9:05 am to Powerman
I'd be afraid of maintenance fees eating into your $.
Posted on 5/22/09 at 9:15 am to Powerman
I've heard stories about sharing a wall with your tenant. It can be a pain.
Posted on 5/22/09 at 9:17 am to Cash
Sounds like you're looking at a duplex as opposed to a condo.
Posted on 5/22/09 at 9:22 am to MileHigh
quote:
in normal times yes, but now? no
Well I still need a place for myself and I really don't mind having a roommate for a couple years.
But if you think that property is still going to nosedive then the 8K might not be enough to protect me from the declining value of the property even on something of about 150K.
I guess I'll have to do a rent vs. purchase analysis over a 5 year period and see where I would come out.
What about taxable deductions? Probably too small in this case to help out much right?
Posted on 5/22/09 at 9:27 am to Powerman
quote:
What about taxable deductions? Probably too small in this case to help out much right?
Mortgage interest. I don't know about anything else.
Posted on 5/22/09 at 9:30 am to Powerman
The $8k can not be used to purchase rental property..be sure to read all the regulations...you must live in it for 3 years before converting to rental property or you will have to pay the 8k back over a 15 year period
Posted on 5/22/09 at 10:04 am to Powerman
quote:
But if you think that property is still going to nosedive then the 8K might not be enough to protect me from the declining value of the property even on something of about 150K.
Well I don't know if its going to or not. Nor how much. Just b.c you are losing the gov'ts money, doesn't mean its not money.
Wait until october of this year to figure it out. If prices are still going down, then its not a good idea. If they have stabalized, then its ok.
quote:
I guess I'll have to do a rent vs. purchase analysis over a 5 year period and see where I would come out.
I would do it for longer. And do you want to live in s. la for 5 years? I can see you moving.
quote:
What about taxable deductions? Probably too small in this case to help out much right?
tax deductions will help. But not all that much. They only help when its in excess of what you already get in deductions.
Let me get the spreadsheet I did for my sister and email it to you. Its got the fields. I even did regression analysis for her.
Maintenance is the killer.
Posted on 5/22/09 at 10:10 am to MileHigh
What city is the condo located? Is it in a central location? If you are near a hospital, you can always rent to traveling nurses or new staff to the area.
Posted on 5/22/09 at 2:02 pm to who dat who dere
Let's assume for the purposes of the discussion it's in either New Orleans, Baton Rouge, or Lafeyette.
Don't know where I'm moving to next
Don't know where I'm moving to next
Posted on 5/22/09 at 3:31 pm to Powerman
If you move to Lafayette, you may want to consider buying - rent is pretty high here. My ex was paying about 1100/mo for a 2BR apt. You can find 2 BR townhouses/condos that are centrally located for under $150,000. With a townhouse you may be able to avoid association fees.
Posted on 5/22/09 at 4:15 pm to lsubandmom
Although I'm glad you're urging him to consider the costs of renting versus the costs of ownership, I'm disappointed that you don't just come up with an ownership number for him per month instead of a purchase price.
Posted on 5/22/09 at 4:52 pm to Tiger JJ
Even if he borrowed $150,000 on a 30 year mortgage - he could probably keep it under $825/month including taxes & insurance. I know that doesn't include upkeep, but it might be something he would want to consider.
Posted on 5/22/09 at 10:13 pm to Powerman
Interest rates on a 30-year mortgage are very low now. People expect interest rates to start going up next year. I don't know how much.
When interest rates begin to rise home prices will have to drop. More foreclosures will occur.
If prices drop 10%, then your $150k condo is now worth $135k for a $15k loss.
Home prices in La. are high. So far we have been partially shielded from the economic disaster.
Maybe you should rent a place and get a roommate. Save some money, then pay cash when you're ready to purchase a condo.
You have to pay property tax on a condo. That could cost an extra $100/month. Homestead exemption covers the first /$75k. The better the price you get the condo, the lower your taxes will be.
When interest rates begin to rise home prices will have to drop. More foreclosures will occur.
If prices drop 10%, then your $150k condo is now worth $135k for a $15k loss.
Home prices in La. are high. So far we have been partially shielded from the economic disaster.
Maybe you should rent a place and get a roommate. Save some money, then pay cash when you're ready to purchase a condo.
You have to pay property tax on a condo. That could cost an extra $100/month. Homestead exemption covers the first /$75k. The better the price you get the condo, the lower your taxes will be.
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