Girl who dances in a cage (cagekitten) wrote,
Girl who dances in a cage

Maybe I should give up that dream of owning it

As much as I want to purchase the property I just entered into a lease for, it looks like it will be a bad idea, for the same reason the current owner is trying to sell it. The value of the property exceeds the amount of rent you can collect for it.

By my estimates, the mortgage on this property is about $6,000.00 per month. The combined rent on all 3 units in the building (a commercial/retail space on the 1st floor, a one bedroom apartment on the 2nd floor, and my two floor/two bedroom townhome on 3rd and 4th floors) will bring in between $4,000 to $4,500 per month. The current owner is $2,000 per month short of what she needs to pay the mortgage (that's why she put it up for sale). And while that $2,000 buys her (or myself, if I purchase it) some equity, you could lose $24,000 a year for years before you even begin to build any equity.

Living there while I own it doesn't change this scenario at all. Let's say I moved from the two story townhome into the one floor apartment and rented out the commercial space and the two story town home. I would be collecting about $3,000 to $3,500 a month rent and be stuck paying $3,000 a month of the mortgage for a one bedroom apartment. And wouldn't it make more sense to not do that, and just rent an apartment for $1,000 a month or buy a condo for $2,000 a month? No matter how I look at it, it appears to be a $2,000 a month sinkhole until rental prices start to go up that high in the next 10 or so years. Am I wrong?

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