Is renting my condo a good deal and rental projections

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Is renting my condo a good deal and rental projections

Postby marlon » Sat Jan 08, 2011 7:10 pm

Hi there, can you give me your valuable opinion about the following since I have to leave to another state:

- My condo is a 3 bedroom, 1250sq ft., very nice with unusual garage space (it fits 3 cars inline), near Microsoft and Redmond towncenter. I own $278K, financed at 5.125%. Including HOA and taxes, I pay $1,970/month. So if I take account tax return, I end up paying $1,820/month.

If I am able to find some to pay rent, let's say $1,500/month, I would need to add $320/month from my pocket to pay the mortgage what is bad (but at the same notice I did not put down payment on this condo, just spent money with some remodel). I am also aware that I need to reserve money for maintenance and emergency in case unit remains vacant.

Question:
I am wondering if in few years (3 or 4 years), rental could go up to a certain point that I would no longer need to put money to pay the mortgage. If so, that could be a good deal, isn't it? I imagine that even if I spend some money to complete the mortgage now, later this could sustain itself what is good.

Please let me know what you think and let me know if rental trends, now that many people are leaving homes, are to remain strong. In California I've noticed a noticeable increase in rental prices in the last few months.
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Re: Is renting my condo a good deal and rental projections

Postby ira s » Sat Jan 08, 2011 10:58 pm

My inclination would be to try to sell the condo now rather than rent it out.
1. Rents seem to be going up a little right now, but we don't know that they'll keep rising. They might, but so might homeowners insurance, taxes, and homeowner dues.
2. Do you want to be a landlord? Are you going to be nearby when things go wrong? If not, are you prepared to pay someone else to manage the property? Being a landlord is not stress free. I've done it. It's a pain in the butt. Worth it if the rent covers the mortgage and the property is appreciating in value, but in your case, the rent won't cover the mortgage, and what the place will be worth in a few years is anybody's guess.
3. What happens if you rent it out for three more years, and rents don't rise? You'd be subsidizing it about 320 per month , let's call it four thousand per year.
Over three years, that's 12,000 dollars. After three years, let's say you decide to sell, and you can only sell it for what you could sell it for right now. When you sell, you have to pay all real estate commissions, real estate excise tax, and title and escrow, all told usually around 9% of the selling price for all that.
4. Do you currently owe more than the condo could be sold for?
There would be nothing wrong with renting it out if the rents could cover the mortgage, or if you were certain that it was going to appreciate in value.
There are a lot of condos out there. It's pretty competitive. Even with more condos being foreclosed on, they just built so danged many of them.
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Re: Is renting my condo a good deal and rental projections

Postby marlon » Sun Jan 09, 2011 9:51 pm

I forgot to say the condo was appraised few weeks ago at $250,000. I paid $280,000. I owe $278,000.

Ding. It will be tough. If I sell it now, I'd take a $40K hit if I count real state agent fees, etc. I can't lose that type of money. I'd rather foreclosure. I already decided I would not buy another property and finance it. However, I worry big time about finance cars and peril to let bad credit hurt potential job offers from financial institutions in the future.

It seems it will be a gamble then.... hopefully rentals go up, otherwise I will take a big hit.

I guess the other option is for me to try to take job transfer back to Seattle. What sad situation. Transfer my job there even if I do not like the place just because I am stuck in a damn property.

If some economists are right and high interest rates kick in, I guess inflation could make rental prices go up I guess. If interest rises to above 7%, I imagine property prices can go down even further.
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Re: Is renting my condo a good deal and rental projections

Postby Markor » Thu Jan 13, 2011 1:47 pm

So many people are going to walk away from loans, I doubt the consequences will be too severe. Lenders won't have enougth customers otherwise. They've got to ease up on conditions or tank eventually. I think they're waiting for prices to bottom, then it will be good for business to open the floodgates wider.
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Re: Is renting my condo a good deal and rental projections

Postby GetReal » Fri Jan 14, 2011 1:10 pm

Marlon, rental prices have nothing to with inflation. They are based on the income of the renters and scarcity of available rental properties. If inflation kicks in at 20% and local incomes stay the same, do you really think (especially with the flood of foreclosures) rental prices would go up 20%? You would need for incomes to adjust accordingly before you can price the rental that high.
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