Buying a neighbor's condo at a discount; selling mine

Buy the other one and rent it out. Can you get over $700 a month for it?

Chargum85 said:   Buy the other one and rent it out. Can you get over $700 a month for it?

Probably $700 on the dot. There is a similar condo currently renting for $750, but it's on the top level.

jerosen said:   Can you pay with cash? I assume you have a mortgage on your current condo and would need to finance the 2nd condo too.
If you would have mortgage on yours and the new one then you may have difficulty qualifying for the loan to buy the other condo since they'd count your current condo plus the new condo both against your debt to income ratio. Can you qualify for loans to carry both mortgages at the same time without counting rental income?

I won't be able to pay with cash, I'll need a second mortgage if I buy first. I put 20% down on my current condo, and haven't knocked much principal off in a year (another $1500). I've heard I can buy with a contingency for my current place selling and "sometimes" a lender will work with people between homes so they aren't hung out to dry.

Bryanhoop said:   .. I've heard I can buy with a contingency for my current place selling and "sometimes" a lender will work with people between homes so they aren't hung out to dry.

The people selling the condo may not want to accept a contingency sale. They seem to be dumping it for cheap and may not want to wait around for you to sell yours for full price.

nycll said:   Sell first. Your profit margin is pretty thin so you need to lock in the sale.
But he won't be able to sell first, because there's an identical condo on the market for $11k less.
And he might not be able to sell afterwards because the comparable sales (the other condo he buys) might make financing impossible.

Best bet is to buy it and rent one out. Or pass.

If the neighbor's condo is identical to yours, then why don't you just buy and re-sell the neighbor's condo?

DeGlass said:   Bryanhoop said:   Chargum85 said:   Buy the other one and rent it out. Can you get over $700 a month for it?

Probably $700 on the dot. There is a similar condo currently renting for $750, but it's on the top level.
OT, but $80K unit renting for $700 is a great buy/sale.

Not that great, as a condo means there is a condo fee, so its definitely below the 1% rule, plus even more important is that the condo rules may forbid renting the unit.

If you're buying a similar unit in the same condo complex, I doubt the lender will believe you that you're going to sell your unit and move into the other one. They would probably assume it's going to be a rental and it'd have to be an investment property. Most lenders don't bother with bridge loans anymore, they want to see if you qualify for both mortgages at the same time. If you don't have the income for it, it isn't going to work.

It might also be too late to approach the owners directly and try to cut out the real estate agent as the contract is already signed. One thing you can do is just contact the owner and see when their contract expires. In theory, you could contact the owner, and then the owner can just cancel their contract with their agent and you would buy it directly from the owner. Just make sure you've never had the agent show you the unit. The agent might get a little suspicious once the unit sells after he's cut out of the deal though.

Also 11k cheaper isn't really that much cheaper. In order to flip it, you'd probably have to wait a year so that the sale isn't used as a comp when you try to sell your unit. That means ideally, you'd buy the other unit without an agent, rent it out for a year and then try to sell one of the units. Or this is how you get started owning investment property. Usually you break even if the price of your unit goes up 10% because you typically have to pay 5-6% in commissions, then there are attorney/title fees and mortgage closing costs along with inspections and appraisals. That would pretty much wipe out most of the profits you're thinking about.

As others have said, there is no benefit. Once you buy theirs you have established the market value. (this is going to happen to you whether you buy it or someone else does) So you end up with two units worth 69K each. Now if their unit is completely unimproved compared to yours then its not such a steep discount as you think it is. 11K variance in values is not that much, really. A better view and a new AC unit can be worth that much.

One idea is that you could combine units into a double-sized unit. (if the condo next door to me shows up on the market cheap you can bet I will try this one) I was looking at buying a much larger apartment in my building, and ran into the issue that its automatically an investment because its too close to my old unit.

How much are your association dues and is this in an enclosed communitity or a building?

If you want to be a landlord then consider leasing theirs out, but be aware that your tenant will know how to find you in the middle of the night.

Sell yours and walk away.

Alright, it sounds like I should stay put. How long will it take before that comp stops dinging my property value?

Buy the neighbor's and keep both of them. A man needs some place to keep his mistress.

henry33 said:   Bryanhoop said:   Alright, it sounds like I should stay put. How long will it take before that comp stops dinging my property value?

Comps are typically good for a year, but some banks may want more recent ones like within the last 3 or 6 months. The problem will be the sale after that one, will it go for the same 69k or will it go for 80k. Your worry is that the comp sets a new pattern and isn't a one time item.

Thanks for the insight. There is another unit in our same building that is selling for $82000, although it has been on the market for >6 months. I guess this sale will screw them over the most, so I can't complain too much.