Buying a Condo

[EasyEd]

I’m currently looking at buying a condo. A good buddy of mine bought a condo in the same complex a few years back when the market was high for $310k. I’m looking at an identical unit that is now about $235k, but I think I can get it for around $215, as the seller is pretty desperate. Anyway, I only want to stay there for 3-5 years, and then leave. Do you guys foresee the market getting back to what it was? Would I be able to sell it for $310k again as it was sold for about 3 years ago? If so, how long do you think it will take before the market gets to that point? I’m not necessarily looking to turn a huge profit on the place or anything, I just want to be able to know that in 3-5 years if I’m ready to move to a bigger house, I can just sell and turn a small profit and move on, and not worry about staying in it forever until the market shifts, which is the predicament my friend is in now who lives there. Thoughts???

 

[Grantspots]

The most important thing is that you don't fall into the trap of getting the type of loan that doubles your payment after two years. I may be incorrect about this, but I believe that was one of the biggest reasons we had a housing crisis. It wasn't just that property values went down. It was also that people's payments doubled. So stay away from anything that says "2 year ARM". None of us can predict how the market will look in 5 years.

-G-

 

[hair_tomorrow]

The general rule of thumb "used to be" that you'd need to stay at least 6 years to make a profit.

Now it's anybody's guess. Now is a great time to buy in most parts of the USA - but staying only 3 years might be cutting it close - unless the market does a quick and dirty turn-around - not too optimistic about that.

As long as you're getting a good purchase price (sounds like you are) and a good (low) fixed rate (between 5% - 6%) you should be OK (but please don't hold me to that).

The tax break you'll receive over the next 5 years before you sell will be a really nice help. Most of your monthly payment will be interest (deductible) and your annual property taxes should also be deductible.

I'd like to believe that the market will stabilize over the next 5 years. I think we're close or near to the bottom now. Would hate to think that it could get any worse.

Best of luck!

 

[The Gardener]

I don't think this is a bad time to buy given the discounts in asset prices right now, and the low interest rates. Its kind of a "best of both worlds" situation! Are we near or at a bottom, who knows, I'd wager a guess that we are not, but the concept of a real estate "bottom" can vary greatly from region to region. If you buy a nice property in an area that has good long term economic viability, then you should be fine and not need to worry about losing value. In other words, buy in an area where you know people will still be wanting to live in 5 or 6 years from now. Don't buy in an area that is full of foreclosing properties... as the economic viability of that area will drag down your housing value as well.

Adjustable rate mortgages have lost their luster anyways, the interest spreads on them make them not even close to being as attractive as they used to be during the bubble times, so I doubt you'd be offered one. I'd recommend against it, as the long term interest rate outlook is grim. This is a great time to lock in at a low fixed interest rate on a discounted asset.

I think the most important question to ask before buying a property is how solid your employment arrangement is. Do you have good long term job security at your current employer? Do you work for a business that is sensitive to economic fluctuations, and if so, how "high on the totem pole" are you? If there is uncertainty here, you may want to delay buying property and committing to that payment.

One other thing... when looking at condos in particular, in addition to the mortgage, you will also have association fees. Make sure to ask lots of questions about ALL of the fees, and what they cover. I'm not sure what the physical arrangement of your potential new condo is, but some have parking fees, certain payment arrangements for certain utilities, etc. Don't let them surprise you with anything, some of these fees can be steep. Additionally, ask if they have any impending plans to upgrade any of the infrastructure within the condo complex.. as this would potentially signal an association fee increase in the near future. I got burned on this in my old condo, an "improvement project" overran the budget, and the association fee increase grew more than I expected. I had to tighten my belt a bit for a year.

Good luck, and happy condo hunting!

 

[mulder]

I don't think the bottom is in in most areas. The housing market isn't going to recover any time soon, I personally think it's makes more sense to wait a while...prices might get considerably cheaper and won't go up any time soon.

Personally, if I was in a position to buy right now and wanted a condo, I would wait 6-18 months and follow the sale prices closely. There's probably going to be some real bargains soon...if you don't need to rush into it then wait for a great deal.