Home Buying in 95356>Question Details

Yesenia, Home Buyer in California

would you buy a condo, live in it for 2 yrs., then rent it?

Asked by Yesenia, California Wed Jan 16, 2013

i'm wondering if this would be ok to do. buy a condo (most likely payment will be really low compared to single home). live in it for 2 yrs (was told when buying FHA have to live in it for 2 yrs), then rent it out and buy single family home? or sell if profitable?

Help the community by answering this question:

Answers

10
Hi Yesenia

Thanks for your question.

By all means if you are more comfortable with condo payments then go with a condo
that is FHA approved. Finding one and getting an offer accepted can be a challenge

Work with a Realtor who understands.

Also keep in mind one can take baby steps and suceed.

Renting after 2-3 years makes sense.

Good luck.

Ruth
0 votes Thank Flag Link Wed Jan 16, 2013
Hi Yesenia,

Chuck, hit it right on the nail. The only thing I would add is, what are the current rental rates for condos in the area you are looking at?

Take the current rental rate,
Minus HOA fees,
Minus estimated mortgage monthly payment (including mortgage insurance, if any),
Minus estimated property tax
Minus estimated condo insurance
= cash flow.

Take cash flow and multiply times 0.92 for any minor repairs or vacant time that you need to put as a cushion for any minor repairs.

The final number is how much you will have left over. If that number is less than $100 per month, think twice about renting. A stove needing to be replaced will cost you about 5 months or more of your total cash flow.

Others may be happy with just getting the condo mortgage paid, but experts don't agree with that.

You are not in the business to pay for others to have a place to rent. You want to get in the business of making money from people that rent from you.

That's just my 12 years of real estate investment talking!

Any concerns, ask on this forum, or contact me via my profile.

Douglas Lagos
Realtor, Certified HAFA Specialist (CHS )
Coldwell Banker Residential
0 votes Thank Flag Link Wed Jan 16, 2013
It's not a bad idea, but it's hard to say exactly what will happen in the next two years in the Real Estate Market. We hope (and expect) the market to improve but no one can say for sure...when.
0 votes Thank Flag Link Wed Jan 16, 2013
Three pointers:

1) That would put you in good position to take advantage of the Capital Gains Tax Rule. So this way, you could decide if you want to keep it before the 5th year. Check with your tax adviser to confirm.

2) When purchasing a condo with the intent to rent it, you'll need to take into consideration the cost of the HOA and if your able to convert it to a rental. The CC&Rs and HOA docs may restrict this as a possibility.

3) The margin on a condo rental is typically lower. Now would be a good time to ask your lender if this situation would be a positive, negative or a wash on a future purchase. They are likely to tell you, they will only take into consideration a certain percentage. I know it may be two years away, but try to get as much information as possible.

I hope this helps you,

Rocky

Rocky G.H. Hawrysz
Prudential California Realty
(209) 444-6610 Direct
(209) 433-2000 Fax
(209) 915-6209 Mobile/Text
rocky@prucalifornia.com
http://www.TeamHawrysz.com
License No. 01468373
0 votes Thank Flag Link Wed Jan 16, 2013
Chuck had the right information for you. The question would be, will the Association of the Condo allow for rentals or will they require that it be owner occupied? Will you be able to rent the condo, if allowed by the Association, for enough to cover the HOA fees, the mortgage, insurance, taxes, etc and still give you a positive cash flow.
0 votes Thank Flag Link Wed Jan 16, 2013
Interesting question! I would say, what is wrong with that, but let me ask you few questions back to ask yourself, and when you answer them you will be able to make the decision on what to do:
- Is the location and market in the area warrants that (Value vs. ROI).
- Are there any HOA dues, if so how much and what does it cover?
- IF value in the area does not change in 2 years, can the rent cover your mortgage payment.
- Most Condos have regulations about the percent of units can be rented at any given time. What if there are no openings to rent in two years what should you do.
- Why not invest in a smaller home that can be rented anytime you want? No HOA, Rules and restrictions?
- Did you talk to your lender about the units that are available to FHA financing? You should.

These are few of the questions you should be asking yourself and getting an answer for that should help you answer your own question.

Good luck,

Chuck Bukhari - Your Realtor
DRE# 01416945
Exit Realty Consultants
209-604-9859
cbukhari@liveinmodesto.com
http://www.eHouse2Home.com
Web Reference: http://www.eHouse2Home.com
0 votes Thank Flag Link Wed Jan 16, 2013
Yesenia, I think this would be a great investment for you. I would research (or have your agent) current rentals in your area so that you can get an idea of what renters are looking for and what prices are going for. It could change in the next two years so it's a good idea to think about resale value. Looking for condos with more than one bedrooms, ammenties offered, FHA approved, and location. I wish you luck in your home/investment search.
0 votes Thank Flag Link Wed Jan 16, 2013
Hi Yesenia,
Another thing to consider is whether or not the condo you want to buy with an FHA loan, is in a complex that is FHA approved. You want an experienced/agent broker to help you with that. Also, depending on what area, you can find some really great deals for single family homes!

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate
858-205-5215
brokermcallister@gmail.com
http://www.McAllisterHomes.com
0 votes Thank Flag Link Wed Jan 16, 2013
Hello Yesenia, yes this is a great idea. There are still a lot of areas that you can buy and pay less than rent so you would have a positive cash flow upon renting. Home prices as well as rents are on the rise so act quickly. FYI, you only have to occupy an FHA owner occupied purchased home for 1 year before you are allowed to sell it or rent it out until you can realize more equity before you sell.

You may qualify for CHF Access half percent downpayment program with a minimum 580 fico score and which can contribute towards your closing costs as well. You can rent out your home with this program after the one year of occupancy. There is also a CHDAP half percent downpayment program but it does not allow you to rent out your home. You would have to sell or refinance out of a CHDAP loan. You have to live in it the whole term of the CHDAP loan.

It only takes a few dozen questions to qualify in minutes. I specialze in Under 640 Fico Score Loans and offer credit repair at no cost to raise fico scores to qualify. Here are some links to study and consider.

http://www.under640ficoscoreloans.com/Pages/Conventional.aspx

http://www.under640ficoscoreloans.com/Pages/CHDAPLoans.aspx

http://www.under640ficoscoreloans.com/Pages/HalfPercentDown.aspx

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
0 votes Thank Flag Link Wed Jan 16, 2013
There's nothing wrong with this...it just depends upon what your goals are. It's important to remember that real estate doesn't always go up in a 2 year period - just ask anyone who bought the past 10 years!
0 votes Thank Flag Link Wed Jan 16, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer