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Rental property: bad for one person, good for another?

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  • Rental property: bad for one person, good for another?

    We just listed our condo for sale and got a full cash offer above asking price. I’m pretty sure the buyer is an investor and not planning on this to be a primary residence. They may be using a 1031 exchange to buy this property.

    I’ve written about my property on here before and it seems like this is not a great investment property.

    Purchased 2005: ~$115k (mortgage about $830)
    Potential sell 2021: $265k
    2 bed/2bath 860 sq ft.
    HOA fee: $232
    Likely monthly rent: $1300-$1400.

    I wouldn’t mind owning rental properties in the future, but don’t think this is the right investment property for us right now. But it feels a little weird selling to someone who thinks it is a good rental property.

    Are there certain things about a property or situation that make a rental property bad for one person and good for another?

  • #2
    Are they planning on using it for Airbnb? Renovating it to maybe get more out of the property?

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    • #3
      Originally posted by Nysoz View Post
      Are they planning on using it for Airbnb? Renovating it to maybe get more out of the property?
      I don’t know details, my agent just made it sound like they are an investor. There isn’t much they could do to renovate and flip it. This would be the most a condo in this development has sold for to my knowledge.

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      • #4
        I guess it depends on the person's expectations and perhaps your estimate of the rental income is off? It seems everything is more expensive now. When I was young and struggling to make stones into soup I would purchase, fluff renovate and rent if it seemed like I could make a few hundred dollars each month over the mortgage, anticipating the surplus would cover repairs. I was looking more for the equity and diversification. Perhaps not especially smart but I ended up doing well over the long term. However in this case who cares, you have won! Congratulations on buying low and selling high. Condos can be a albatross around the neck.

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        • #5
          Haha, I had the same thought. Apparently at my open house, the most common question asked was how much rental income it brought.

          Im not a real estate investor and hated being a landlord...Selling that place was like cutting off a weight tied to my waist as I tried to swim across the pool. It felt wonderful! Congrats!

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          • #6
            Who knows? This property market is unhinged. The last 2 multifamily I've made offers less than asking as they won't cash flow at asking and both sold above asking. I think there are people desperate for any type of yield as the bond return is so poor. We really need an increase in interest rates to put some sanity back into real estate prices.

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            • #7
              I don't know what your knowledge of your local real estate market is but these people probably have more knowledge. This is one of those things that is a good deal for both sides.

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              • #8
                Knowledge and volume can make a huge difference. Do you call a handy man or a plumber? Big price difference. Kind of like wholesale vs retail.

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                • #9
                  Yeah, just like private practice medicine; if you're doing full time direct residential real estate, adding on multiple properties on top is really marginal work once you've laid the foundation of management and supporting trades.

                  They maybe simply doing it for depreciation and neutral cashflow too and riding hopes of appreciation.

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                  • #10
                    Originally posted by pierre View Post

                    I wouldn’t mind owning rental properties in the future, but don’t think this is the right investment property for us right now. But it feels a little weird selling to someone who thinks it is a good rental property.

                    Are there certain things about a property or situation that make a rental property bad for one person and good for another?
                    As you may or may not be aware, this is what happens in in every investment transaction. The key word is “thinks” - every seller and every buyer thinks they are on the winning side. That’s what so many failed investors don’t understand. And no - real estate investing is certainly not right for everybody, not even for most people.
                    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      There are a lot of people jumping into real estate investments right now where the numbers just don't make sense. I suspect that is the case with your buyer.

                      The condo potentially might make sense numbers wise as a short term rental, but would the HOA even allow that? As a long term rental, this condo is a money loser.

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                      • #12
                        Originally posted by White.Beard.Doc View Post
                        There are a lot of people jumping into real estate investments right now where the numbers just don't make sense. .
                        Which makes me ask in today's climate how does that even make sense? And figure yup a red flag that we are in a bubble. When John Q Public starts hopping on the bandwagon historically there is a good chance the party will be ending.

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                        • #13
                          Originally posted by White.Beard.Doc View Post
                          There are a lot of people jumping into real estate investments right now where the numbers just don't make sense. I suspect that is the case with your buyer.

                          The condo potentially might make sense numbers wise as a short term rental, but would the HOA even allow that? As a long term rental, this condo is a money loser.
                          The HOA does not allow short term rentals. But they are also very weird about the rules the enforce and don’t enforce. For example, your not allowed to have pets, but many people do. I get a “ticket” on my windshield on the 1st of the month when my car registration expires, that’s how I know it’s time to renew. But if someone smokes in a unit, which is also against the rules and it comes through the vents into my unit, they will claim that they aren’t allowed to tell anyone what they can or cannot do inside there unit. So I think if someone tried to Airbnb it, there wouldn’t be any consequences.

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                          • #14
                            Originally posted by pierre View Post

                            The HOA does not allow short term rentals. But they are also very weird about the rules the enforce and don’t enforce. For example, your not allowed to have pets, but many people do. I get a “ticket” on my windshield on the 1st of the month when my car registration expires, that’s how I know it’s time to renew. But if someone smokes in a unit, which is also against the rules and it comes through the vents into my unit, they will claim that they aren’t allowed to tell anyone what they can or cannot do inside there unit. So I think if someone tried to Airbnb it, there wouldn’t be any consequences.
                            All the more reason to gleefully exit.

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                            • #15
                              Originally posted by pierre View Post

                              The HOA does not allow short term rentals. But they are also very weird about the rules the enforce and don’t enforce. For example, your not allowed to have pets, but many people do. I get a “ticket” on my windshield on the 1st of the month when my car registration expires, that’s how I know it’s time to renew. But if someone smokes in a unit, which is also against the rules and it comes through the vents into my unit, they will claim that they aren’t allowed to tell anyone what they can or cannot do inside there unit. So I think if someone tried to Airbnb it, there wouldn’t be any consequences.
                              That isn’t an HOA, that’s a Good Ol’ Boys Club and you ain’t in it.

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