kujomike
New Member
Cash: $ 0.70
Posts: 3
Joined: 13 Nov 2005
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| condo rental |
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I am currently renting my condo at $150 less than my mortgage and Ins. payments. I have owned it for one year and work overseas. Should I refi my 30 yr fixed to an ARM, inorder to get my payments closer to the rental income? or just wait it out until I can raise the rent?
Purchase price $104,000 (0 down, VA loan @ 6.25%)
Current value $115,000
Rents for $750 (may raise to $800 soon)
Mortgage, Ins, Fees, etc. $900
This was my first home purchase. When I do it again I will not pay retail and will put 20% down.
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Sun Nov 13, 2005 11:50 am |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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As you discovered, if you are going to buy to rent, you do need to figure in all your expenses (interest, taxes, maint., etc.). You are unlikely to get as much in rent as the average person could buy it for themselves, because the renter gets no equity. So the more cash you put into the purchase, the better the cash flow.
Before refinancing, run some figures to check the difference between paying down principal (if no prepayment penalty) vs. closing costs, possible rising interest if variable, and whether interest over the whole term of a new loan is any lower than remainder of your existing term.
At least you are not as upside down as a Califonia woman who bought a Colorado condo or townhome for $395k @ $3000/month when the best rent she could get was $1200. In the meantime, the overpriced condos were not selling and new ones dropped to $365k.
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Sun Nov 13, 2005 6:10 pm |
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bong12187
Preferred Member
Cash: $ 24.50
Posts: 120
Joined: 31 Jul 2005
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| Re: condo rental |
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quote:
Originally posted by kujomike
I am currently renting my condo at $150 less than my mortgage and Ins. payments. I have owned it for one year and work overseas. Should I refi my 30 yr fixed to an ARM, inorder to get my payments closer to the rental income? or just wait it out until I can raise the rent?
Purchase price $104,000 (0 down, VA loan @ 6.25%)
Current value $115,000
Rents for $750 (may raise to $800 soon)
Mortgage, Ins, Fees, etc. $900
This was my first home purchase. When I do it again I will not pay retail and will put 20% down.
Right off the bat I see your problem. Your problem is that you didn't factor in common area fee, PMI, and property tax into the monthly payment. Your assumption that you would have been better off by putting in a 20% down doesn't make sense either if you are looking for passive income and receiving positive cash flow. The best thing to do next time you decide to buy a property is to run the numbers. You have to look at your cash on cash return. This means that what percentage you would receive per year on the money you invested in the property (money actually that came out of your pocket). You also need to know your rental market since this is what is going to pay your bills. Good luck to you.
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Wed Nov 16, 2005 4:11 am |
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kujomike
New Member
Cash: $ 0.70
Posts: 3
Joined: 13 Nov 2005
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Thanks for the replies. When I purchased the home I did not plan on renting it, until I took an overseas job. I think at this point I might be better off raising te rent by $50 and then selling in a year or two.
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Thu Nov 17, 2005 12:34 pm |
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