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Condo To Rent Out |
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Edith: My wife and I both owned condos several years ago and sold them when we bought our house. Now we are interested in buying another unit there as rental property. My thought was to send a letter directly to owners of the best units and look for one who would be interested in selling directly to us. We could share the saved broker's commission. This appears to be a win-win. The seller is getting an immediate buyer plus saving money and we would be getting a unit at less than market value. Any problem you see with my plan? |
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Nothing wrong, I guess. As former owners you're pretty familiar with market value and you know how to judge the units. You just need to find a seller who likes the idea. A more critical question is whether you are familiar with rental figures, and whether you've sat down to calculate expenses. Your costs are more than just mortgage payment, taxes, condo fees and landlord's insurance. You must include something for repairs, for possible vacancies or non-payment (one rough rule of thumb is 5 percent of annual rental), and for lost interest on whatever money you invest. You will have the income tax advantage of a small phantom "expense" for depreciation. But unless you'd have at least a small cash flow after all those calculations, it's probably a poor project. Run all this by an accountant; if you're going to be landlords, you need your own accountant and lawyer. You'll also need to research fair housing regulations, mandatory disclosures and other precautions involved in tenant selection. |
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Edith
Originally published on June 26, 2005 |
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