# Is it a good investment to buy 1BR 1 bath in Margate Community Near Menlo park, Edison?

Asked by Sandhya, Woodbridge, NJ Tue Jan 20, 2009

## Help the community by answering this question:

2
Since I don't know your specifics, let's make some reasonable assumptions and calculate...

Assumptions:

1. Price of condo 200K
2. Tax = 3600/year
3. Mortgage Interest rate : 5%
4. Income you would get if you invest your home equity in other safe investment 5%
5. Insurance 1200/year
6. Maintenance fee 1200/year
7. Repairs 1200/year
8. apartment is rented for 2 years on an average and stays vacant for month after every 2 years for restoration
9. Cost of restoring 1200 every 2 years
10. you spend approximately 40 hours/year managing this apartment and that is worth 30/hour
12. you get rent of 1200/month

so following are approximate yearly income and expense calculations...

Income:

Rent = 14400
Tax saving = 7000 (approx deduction for mortgage interest and depreciation and other expenses)
Total Income : 21400

Expenses:

Interest part of your Mortgage Payment + Income you would have got from investing the home equity in bank deposit = 12000

Property Tax =3600

Insurance payment =1200

Monthly maintenance fee =1200

Repairs =1200

Cost of restoring the apartment after each lease term = 600/year

Cost of days apartment will stay vacant until you can rent again = 600/year

Your wages for time you will spend in managing this property = 1200

Total Expenses: 21400

Profit = Total Income - Total Expenses = 0

So it looks like it is 0 sum game as long as market value of your property does not change.
If it goes up, that will be your profit, if it goes down, that will be your loss.
In current environment you are more likely to make loss than profit.
Do following math to decide for your self...

Rent + Tax saving - Interest part of your Mortgage Payment - Income you would have got from investing the down payment in bank deposit - Property Tax - Insurance payment - Monthly maintenance fee - Repairs - Possible loss of market value - Cost of restoring the apartment after each lease term - Cost of days apartment will stay vacant until you can rent again - Any agent fee if you employ agency to find renters - Your wages for time you will spend in managing this property

If the figure that comes from above formula is motivating enough for you, go ahead.