I like your thinking! Generally an offer price is determined by local sales history, the condition of the unit, how many offers are on the property, how long it has been on the market, how badly you want it...etc. But you probably know this. In most cases the offer price is not gauged by not market rents. If that were the case, more renters might be able to afford a mortgage. Sometimes it works out that rent would cover your mortgage, but in our area, unless you have a large downpayment, you don't see it much.
A few things come to mind:
1) I assume you factored in the HOA payments on top of the mortgage - renters generally don't pay this.
2) Can you make a larger downpayment to bring your payments down?
3) You need to make sure that the HOA is not at capacity for rentals. If it is a smaller complex, HOA's sometimes have restrictions on the number of rentals they will allow. These restrictions may have been put in place by the insurance company, or by the HOA. In addition, some lenders will not lend money if there is a high rental rate in the complex. If there is a restriction in place, and the HOA is at rental capacity, then find out if there is a waiting list and what is involved with that.
4) Think about future rentability: is there a high turnover rate of sales or renters? Is the complex in a desirable location? There are so many condos out there that you need to be sure the complex and the unit is even rent-worthy.
Good luck and Happy Thanksgiving!
Also is unit REO or Short sale? You guys need to work with a REaltor who knows the market!!
Your question is OK but you cannot buy this way
John Wertheimer Prudential
Hello, typically when looking at the purchase of condo typically you will look at what other condos in the area you are looking at are selling for, not necessarily current rental rates. Since you may be moving in 3 years time, looking at leasing compared to buying will be an important factor for you and you may find that leasing is a better option than buying.
Each situation is different and gauging the seller's motivation, length of time the property has been on the market and also considering what other properties have sold in the area will help you to determine an offer price. Rental rates can be taken into consideration, but keep in mind you will need to also factor in the tax benefits of home ownership to have a more accurate picture of the cost of ownership vs renting.
In the 94610 area code there are currently 28 condo listings with a price range of $139,900 to $799,000. Different complexes are considered more desirable than others and HOA fees can vary from a few hundred to close to a thousand. Based on the needs you have (1 or 2 bedroom, can you deal with something that needs some work?) will also determine the price point.
If you have talked with a lender already and have a price range where you are comfortable, you might also consider looking at the lower end of your price range to ensure you have a more comfortable payment.
Hopefully you have a Realtor who is representing you. They will be able to help you to weigh the different factors and help provide sales data to help you make a more information decision.
Hope this helps and if you have further questions do not hesitate to contact me.
Alain Pinel Realtors