First time home buyer?

Question

Hello everyone. I already saw this property (condo) on sale for $125,000 and common charges $435.23. The condo however, is already tenant occupied paying $1150.00 rent/monthly which doesn't bother me at all. The bank is willing to offer me a mortgage of $100,000 and in addition, $8,000 grant for closing costs because is my first time buying. To be honest, I would rather have the condo rented out instead of living in it. Will I have problems with the bank free grant ($8,000) if I am not living in the condo as my primary residency? Can I tell them that I do not want to live in it at the moment but probably in two to three years?

Answer 1

Let assume that these numbers are corrct and that you have 50K in the bank , decent credit, the condo is in a decent area, is this a good buy?
First take the rental income times .95 for a 5% vacantcy rate, net is $1092.50; next back out 10% property management fee unless you want to be fixing toilets, showing and qualifying the tenants, net is now $983.25; now back out monthly dues of $435.23 and your net is $548.02. You left out property taxs and insurance costs but lets guess and say $500 a year for each, which is $83.33 a month and that brings your monthly net income down to$464.69.
Now if your credit is decent and you can get a loan for 100K at 6.5% interest on a 30 year term, your payments would be $632.07.
So you would be collecting $464.69 IF the condo is rented and paying out $632.07. LOSING $ 167.38 IF your property taxs are $500 or less a year, IF your insurance is $500 a year or less, IF the vacantcy rate is 5% or less AND you ahve 25k for a downpayment AND have 25K to cover the montly loss of $167.38 and repairs needed to the property now and for repairs needed in the future.
$167.38 a month times 12 months is $2,008.54 annual loss for rental income, but then you get the tax deduction for the interest spent on the loan, depreciation of the structure over 29.5 years and so the bottomline depends on your income tax rate, if you can take advantage of the loss's and if the market for codonos in your area will apreciate enought o offset the loss on cashflow and give you a return on your investment that justifys the risk you are taking. So does this look like a "good deal" to YOU now???

Answer 2

Grant money is not for investment properties. It's for owner occupants.