This afternoon my husband and I went to view the condos competing for our investment dollars. Really, there was not much difference that warranted a list price that is 25% higher. The more expensive condos have an enclosed garage versus a carport garage. The difference was the the carport garage had no door, the structure was built the same. And the more expensive condos had slightly larger bathrooms. But that was it. No magical kitchens. The baths weren’t even updated, just a few more square feet of space. Does that really warrant a 25% higher list price? I think not. From a rental standpoint, you wouldn’t be able to justify a higher rent for any of the spaces. They are all comparable. One of the condos would probably be easier to rent because it was very neutral (cream wallpaper, cream paint, blonde hardwood floors), but it still wouldn’t command a higher rent. So, it looks like we will be pursuing the lower priced condo. The only thing standing in our way is the owner-to-renter ratio and our ability to get a mortgage. We could pay cash, but then the financials don’t work because we wouldn’t have any interest to deduct for tax purposes.
Stay tuned for the exciting conclusion…
I mentioned recently that my spouse and I are looking into buying an investment property. Specifically, a condo. Well, this week 2 other condos with the same square footage and layout, only 2 doors down from the one we’re considering, came on the market. The asking price on each of these condos is 25% more. Hmmm. The descriptions don’t make either sound like they have a fabulous gourmet kitchen or spa bath. So what gives. They are in the same types of buildings, monthly Association fees are the same, location is the same, parking situation is the same. We’re looking at both of them tomorrow, so I’ll know conclusively then what specifically is different. But something just seems fishy. Did the new sellers get bad advice from their agents on pricing? Are the new sellers just too optimistic about their property market values? The condo we looked at has been sitting for 6 months and actually shows very nicely. And still hasn’t sold, even with a significantly lower listing price. Now I’m ticked that these two other condos may make it difficult for me to negotiate a better price on the one that has been sitting.
Stay tuned for more info tomorrow.
After sitting on the sidelines for a few years, I’ve decided that this is the year I’m going to start personally investing in real estate. I’ll be sharing my thoughts and learnings as I go through the process.
This past week, I think I may have found a good condo property. There are a few issues though. It’s a small building and 40% of the units are currently rented. If I buy, the rental-to-owner ratio would go over 50%, potentially causing issues in getting a mortgage. However, I ran the financial analysis and the numbers are the best I’ve seen yet. Positive cash flow and slightly negative net income. The building is OLD, so I’ll need to insure that there aren’t going to be any special assessments soon, and that the HOA fees won’t rise considerably.
While I’ve built my own investment model through Excel (yes, I am a financial geek), here is a good online financial analysis tool that you may find useful…Investment Property Calculator.
Stay tuned for more exciting adventures as I continue on my path to becoming a landlord.