Yesterday I released Part 1 of this series where we discussed the importance of using a local lender when buying a condo and whether or not a condominium is going to qualify for a Fannie Mae, Freddie Mac product or portfolio.
So now it’s Part 2 and I wanted to talk to you about what to expect as far as can you actually cover your costs and make a profit when purchasing a condominium?
I was reading an article in a magazine, Condo Owner, and one of our local realtors was quoted in there and he did a really magnificent job in showing the break down of cost.
So I thought I would share a little bit about that because Cynthia and I often get asked these questions. It used to be that you could definitely re-coop your costs and make a profit. Then, after the market slump, it wasn’t so easy to do.
Obviously, if you’re going to be paying cash, you can easily make up some profit because you don’t have that debt service going out and that mortgage payment. But if you are financing, and we do see a lot of that, you need to consider what your costs are going to be.
You are going to have your down payment. Then you’re going to have your closing costs. And then you’re gonna start those monthly expenses, which include:
- Your mortgage payment
- Your insurance
- Property management fee, which can range anywhere in our market from 22% to 27%
- Cleaning fee
- You need to put away for reserves, for when it’s not rented or when you need to do some maintenance on it and maybe replace some things or do some updating.
So, there are a lot of costs that you need to consider.
According to this article, it was noted that, as we know, most money market C.D.s are only paying anywhere from two to three percent.
So, most people are happy if they can get a little bit more on their rental investment, than what they’re getting at a bank and, let’s not forget, you get to use that unit yourself for some personal R&R and enjoyment.
So, what I think is important to you, is to really work with your realtor and know your numbers. Crunch those numbers. Get ahead on your homework and understand what are the costs to own and the cost to maintain and what am I going to have at the end of the day?
You know, for some of our customers, it’s just breaking even because they really get a lot of enjoyment out of using their condominium just for brief period of time. But for others that are really interested in the investment side, they really need to know those numbers.
So, your local lender and your local realtor can help you crunch those numbers and help you find what’s going to be the best investment for you.