# buying condo to rent out



## summer (Jul 7, 2011)

I have always wanted to buy real estate to rent out. My parents did that with success.

Anyway, I will be getting an inheritance from my dad's estate. He had a condo he lived in. Likely, what will happen is it will be sold and the money split among his children (including me).

I have pondered the idea of buying it (for fair market value) then renting it out.

Is there anything I need to be aware of?

Here are the financials: 3 bedroom condo, would likely rent for $1100 a month (maybe more), tenant to pay utilities. 

Costs are 220/ mo condo fee, taxes of 2500 a year approx, plus property insurance (which wouldn't be much).
Condo's fair market value is 195 000 (though if I did it without an agent, I would think it could be bought for less). 
As far as money down, I could put down as much or as little as would make sense.
Either way, should I sell it through the estate or buy it then rent it out.
Any comments??


----------



## I'm Howard (Oct 13, 2010)

Ad nauseum BUY REITS, you will diversify over RE and with professional management, less stress, better return.

Your Parents probably paid $30,000 for a Condo. not $300,000.

I also own BPO.


----------



## Easy Does It (Sep 24, 2010)

In my opinion, it’s not a good way to allocate your funds. Without getting overly technical based on your numbers and assuming a relatively small down payment you would be renting this property at a loss. For you to break even it would require too much cash up front (DP) The other thing to keep in mind is will you be able to increase rents enough to compensate for the eventuality of rates increasing. Something to keep in mind.

EDI


----------



## the-royal-mail (Dec 11, 2009)

Terrible idea. This question has been discussed in CMF many, many times. It's like the "should I borrow to invest?" threads that keep reappearing every couple of weeks.

Besides, if you do the math on a $195K condo with those sorts of taxes and fees, and look at what average rents are, you will likely be losing money. Plus you haven't accounted for your time, cost of repairs, any mgmt fees and the overall hassle of dealing with a tenant and collecting rent.

Just because you can do something, doesn't mean that you should.


----------



## summer (Jul 7, 2011)

the-royal-mail said:


> Terrible idea. This question has been discussed in CMF many, many times. It's like the "should I borrow to invest?" threads that keep reappearing every couple of weeks.
> 
> Besides, if you do the math on a $195K condo with those sorts of taxes and fees, and look at what average rents are, you will likely be losing money. Plus you haven't accounted for your time, cost of repairs, any mgmt fees and the overall hassle of dealing with a tenant and collecting rent.
> 
> Just because you can do something, doesn't mean that you should.


I could put a large down payment if that changes anything. I could even pay it off but I don't think that is a good idea as you can write the interest off.
I guess it's not a good idea.


----------



## ChrisR (Jul 13, 2009)

Dang... why don't people rent out $200,000 condos for 1100 bucks a month where I live?


----------



## Cal (Jun 17, 2009)

Generally when this happens between siblings they will get an estimate or two, deduct the RE agent fees, and go to a lawyer to have the paperwork drawn up.

Yes you potentially can make money off of it. It is great to have rental income. However it is fully taxable. Unlike dividend income.

My concern would be what do your figure your ROI (return on investment) would be vs selling (splitting between all parties) and using your share of the money to invest.

IMO most properties could not return what the market can for me. Perhaps your situation is different.

But at $1100 a month, minus the condo fees, insurance and taxes, would leave you roughly $8000 a year in income. Fully taxable. (not accounting for any repairs)

$195,000 invested in dividend stocks could return you roughly $8-10,000 (4-5% return). Not fully taxed. 

Just my 2c worth. All the best.


----------



## HaroldCrump (Jun 10, 2009)

Cal said:


> But at $1100 a month, minus the condo fees, insurance and taxes, would leave you roughly $8000 a year in income. Fully taxable. (not accounting for any repairs)
> 
> $195,000 invested in dividend stocks could return you roughly $8-10,000 (4-5% return). Not fully taxed.


And doesn't require you to fix leaks in the middle of the night.
Does require investment research though.
I guess it depends on which one you enjoy more


----------

