[quote=urbanrealtor]The thing I would add to Davelj’s post is that you really need to add the hoa fees into that rent equation.
Specifically, the unit is going to take in rent minus hoa fees. The real annual rent is this times 12. I would knock off 20% to account for repair and vacancy costs (as well as other costs like tax and insurance). This can get you a sort of rough cap rate.
I would find these compelling if I could get at least 8% of sale price back annually (based on the above numbers) I would find that compelling enough to consider. Part of my reasoning is that rent increases every year and vanilla loan payments do not (emphasis on vanilla).[/quote]
Yeah, my response was incomplete. You have to take into account the HOA and property taxes. So, specifically, compare imputed rent (assume no growth) with [mortgage interest + HOA + property taxes]. Tax effect the interest and property taxes if you like. This is getting a little technical but the basic idea is to compare your all-in cost of ownership with your all-in cost of renting. If they’re about the same then you probably won’t get hurt too bad in the long term in buying. But in the short term all bets are off.
Since it sounds like you’re planning on owning this place (as opposed to being a landlord and renting it out), I’d disregard the vacancy and repair friction above in your calculations. You want to make an apples-to-apples comparison, after all.
