Is it time to buy my own place?

Question

I've purchased a couple investment properties but I still rent my primary residence. I keep debating whether I should buy or rent my own place. I live in Miami Beach where prices are going through the roof. Most of the condos on the beach don't really cash flow though because the HOA fees and taxes are so high here. I didn't want to tie up too much money in my own condo so I'd have more to invest. But I'm afraid if I don't buy something soon my rents are going to get outrageous and the prices of condos are going to get out of my price range, which will prohibit me from ever owning anything nice on the beach and possibly from being able to even rent here anymore. Also, most of the new constructions in my neighborhood are going up as strictly rentals, so condo inventory is getting low. Thoughts?

Robert G. · Answer

You may not have to worry about rising rents, but you will have to worry (rightfully so) about rising HOA costs AND special assessments instead.

I'd pass, personally.  Rent for now and scour the surrounding areas for better value SFR.  IMO, when it comes to buying condos for personal use.....you either worry about the value/dollars, in which you shouldn't buy (for the reasons above), or you're sufficiently wealthy to not worry about the value, in which case you wouldn't be here asking for advice (and wouldn't care about increases in HOA costs or special assessments).

Ray S. · Answer

I feel like rents increase year after year in a rental building where you're not dealing with a condo/owner. And they're going up dramatically in Miami, they've been rising about 5-10%/year where I live.  HOAs in a well managed building may go up maybe 5-10% every few years, but that's on a much smaller amount. I've lived in places that had no HOA increase in the 7 years I've lived there. Assessments are unavoidable if you own, if it were your property you'd be paying it in your own repairs. As long as the association isn't corrupt, they usually go towards useful projects, and are rare in newer buildings.

Ray S. · Answer

My goal with this isn't so much as an investment, but so that I don't miss out on ever owning here or have to pay outrageous rents if I plan to live here longterm. I'd be looking at a 1 bedroom, which go for about $400-500k in this area for something with a killer view. The same rent for about $2500 and rising fast. So if you take into account HOA fees and property tax, the property doesn't come close to cash flowing.

But if the market keeps going up I'll never be able to buy anything here, and will be stuck renting forever. The fear there in that is that I will eventually have to downgrade my accommodations as rents rise into the $3k+ range, whereas if I buy I don't have to worry about rising rents. Though it would be nice to possibly rent it out someday and break even or cash flow, my primary goal is to have a place to live since I already have investment properties.

Thanks

Bogdan Cirlig · Answer

It depends on many things, for example, I do it to also lower my Adjusted Gross Income (AGI). You can't ignore the fact that the single biggest tax break W2 income earners have is the mortgage interest tax break. If you are in the higher tax bracket you effectively can save 1/3rd of your mortgage interest $$. Take a look where you live, see rent vs own comparison, account for all the things after tax and see if it makes sense to get your own pad.

As Elizabeth said, you can get an FHA with 3% down or so (see the limits for your county). Make sure you account for tax, insurance and have a net bottom line after tax. If you hunt down good deals you might get a fixer upper and get going (if your skills are good to do light fixing, painting, applis).

I would say Mia Beach is a highly speculative place due to it's amazing tourist attraction and a lot of festivals happening all the time.

Look at below numbers. What I don't like is the renter density and vacancy amount:

Also the prices are insane:

In my opinion, you are late to consider that strip unless you buy for speculative purposes (i.e. buy low sell high fast, flip, fix etc).

Also Miami Dade is generally a high crime area, with good parts yes, but you need to know precisely "boots on the ground" what you are doing and where.

Look to start with something that will cash flow and you are able to cover the vacancy from you other income IF it comes to that.

Elizabeth Colegrove · Answer

everyone has their own opinion on this subject! I personally like owning my own home to the point that I have turned personals into an investment strategy . Check out podcast 103, where I had the honor to talk about my strategy!

We put very little down in a personal. For us the whole point is the have someone else pay off or investments. There are some great 5% conventional loans ;) have you thought about renting out the rooms in your home? Personally if the numbers made sense and I lived where you do. I would buy and older needs work home. Put as little down as possible, and slowly fix it. I would at the same time rent out rooms so, now I have an investment asset, sweet equity and living cheaply! So now I have another asset towards my investment.

But take that with a grain of salt ;) I am a big believe of personals being a huge asset!

Is it time to buy my own place?

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