We had made a decision 5 years ago to buy a house for my growing family and move out of the tiny condo I owned. At the time the condo was $10k underwater from the housing crash, so we decided to rent it out until we got out from under it. This is the current situation:
Monthly, the condo costs me $990 (mortgage, insurance, taxes, common charges, sewer), I’m paid $800 in rent, and so I have to make up the $190 difference each month.
I’ve been looking at it as an investment this way: Since the principle portion of the total expenses is $490, my $190 payment is ALL going to principle. As long as the housing market is stable or is growing the $190 payments I make are building the equity, which will eventually be in my pocket again when I sell. The risk I am taking is that if the market turns I will loose that equity. I’ve since built up ~30k in equity. Am I thinking about this rental investment correctly or should I try to sell the condo since I’m not underwater anymore?
Side notes: On raising the rent: The landlords I know that raise the rent every year have a high turnover and often loose out by having a vacant rental. My tenant has been very good and stable for 5 years, so I am not giving him a reason to look elsewhere. If I had a high turnover I would be without that income for a few months and may end up with a crappy tenant if I’m trying to get it rented quickly. When they do eventually leave I will raise the rent to the current market value, which would be about $900 and still less than the total expenses mentioned above leaving me in a similar situation.
On managing the condo expenses: I aggressively put extra to the principle, shop for insurance, and have refinanced to pay less interest on the long term.
Submitted January 10, 2018 at 10:06AM by Envirosci http://ift.tt/2mmrnGA
