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Can experts tell me if this is a poisonous asset? HOA $460/mo
Town House built 1987
good schools
Price $300k ($500k in 2006)
Rent $2300/mo
Tax $520/mo
Insurance $100/mo
Please help!
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What's your exit strategy? Profit center?
With HOA as high as 460/mon, your monthly rent is essentially 1850. And your tax is quit high at 520/month. There is basically not cash flow to talk about if you're even 50% financed, let along 100% financing.
Do you realistically believe the house would appreciate significantly within next 5 years? 10 years? 20?
Where is your profit center?
Well, is this the only deal you've found in your area?
Like others have said, it's definitely not a super deal. The 50K discount merely takes care of the commissions of a buy/sell round trip and other carrying costs (property tax, transfer tax if any, mortgage fees, insurance, repair, utilities, and others). So if you want to sell it within a short time, it's hard to realize any profit. Actually I'd consider it lucky if you can break even.
So, flip is probably out. Now, how about rent?
Well, as I have mentioned, your effective rent after the high HOA and tax, is 1500 at best, far away from 1% rule. So the only way to make money is to keep it long term and hope it'll go up. This is a tall order, because of the economy. I think that the market won't come back up within 10-15 year, buy BZ has said that I'm too pessimistic.
Anyway, if you have looked around and this is the only deal, and you really want to own a rental, it MIGHT be OK, if:
1. You're confident that the local economy has basically bottomed.
2. You can absorb the negative cashflow, which is a sure thing for minimum 10 years
3. Be prepared that it would have average 1 month vacancy per year
4. There is really no better alternative way to invest.
Then, maybe.
FYI, I certainly wouldn't. I know places that you spend 40-50K, rent for 600-700 for good working class people. The return is much higher. Even FL's condo could be better than this.
Hope this helps.
www.sunskitehomes.com
Can experts tell me if this is a poisonous asset? HOA $460/mo
Town House built 1987
good schools
Price $300k ($500k in 2006)
Rent $2300/mo
Tax $520/mo
Insurance $100/mo
Please help!
===============
What's your exit strategy? Profit center?
With HOA as high as 460/mon, your monthly rent is essentially 1850. And your tax is quit high at 520/month. There is basically not cash flow to talk about if you're even 50% financed, let along 100% financing.
Do you realistically believe the house would appreciate significantly within next 5 years? 10 years? 20?
Where is your profit center?
Well, is this the only deal you've found in your area?
Like others have said, it's definitely not a super deal. The 50K discount merely takes care of the commissions of a buy/sell round trip and other carrying costs (property tax, transfer tax if any, mortgage fees, insurance, repair, utilities, and others). So if you want to sell it within a short time, it's hard to realize any profit. Actually I'd consider it lucky if you can break even.
So, flip is probably out. Now, how about rent?
Well, as I have mentioned, your effective rent after the high HOA and tax, is 1500 at best, far away from 1% rule. So the only way to make money is to keep it long term and hope it'll go up. This is a tall order, because of the economy. I think that the market won't come back up within 10-15 year, buy BZ has said that I'm too pessimistic.
Anyway, if you have looked around and this is the only deal, and you really want to own a rental, it MIGHT be OK, if:
1. You're confident that the local economy has basically bottomed.
2. You can absorb the negative cashflow, which is a sure thing for minimum 10 years
3. Be prepared that it would have average 1 month vacancy per year
4. There is really no better alternative way to invest.
Then, maybe.
FYI, I certainly wouldn't. I know places that you spend 40-50K, rent for 600-700 for good working class people. The return is much higher. Even FL's condo could be better than this.
Hope this helps.
www.sunskitehomes.com
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