Am I in trouble down the road?

[Eric Neal]

Hello, BP.

My wife and I just closed on a 2/2 1,059 sq. ft. condo in Durango, CO where we will be living for the next 2-3 years, maybe longer. 5/1 ARM at 3.375, 15 year am, $188,000 purchase price, loan of $169,200, monthly payment of $1,199. There is also HOA of $353/month that covers ext. insurance, water, sewer, ext. maintenance including snow removal, trash, and some shared amenities like pool and BBQ area. The condo is literally across the street from Fort Lewis college (liberal arts college with student body of 4,000). Our thought is that we could some day rent it to 2-3 students or MAYBE a family for around $1,800. The 50% rule says we would lose about $300/month as long as there is a mortgage but I won't be on the hook for roof, water heater, landscaping, etc. The city is growing and the trends seem to be moving in a positive direction but no one can predict the future. Sale isn't a great option because the condo is not FHA approved, seriously limiting our potential buyer pool. Also, we would like to make this our first investment property if it isn't a total bad move. Any thoughts from the group are greatly appreciated!

[Patrick Liska]

First, you need to read the bylaws of the HOA, do they allow you to rent to others ? in your case the expenses talked about in the 50% rule are covered by the HOA fees. so your total cost is $1552, if your mortgage pays the taxes too ? if you are allowed to do this and you can get $1800 / month, you will make $248 / month. one thing you may want to check as well, you said the HOA fee covers insurance for the house, will the insurance cover the house if you rent it out ? they may not.