Moving to St. George. Need investment advice!

[Thomas Turek]

Hey everyone! I hope I’m in the right place to post this. Im new to Bigger Pockets and have some questions about a some investment opportunities. I began a career in real estate full time as an agent but had a bit of a failure to launch my first year. I got a full time marketing job offer for a great lending company and I’m probably going to take it for more stability and to gain more expertise in marketing for future real estate work. The job will pay about $42,000 base plus small commissions for successful ad campaigns and the like. I’ll need to relocate 4 hours south of where I am now and here’s where my questions start: I bought a condo 10 months ago for about $165,000 with about $8,000 down (like 5% down) at 4.5% interest 30 year fixed rate. I want to hold on to my condo and use it as my first investment property if possible and potentially purchase a new build home In the town I’ll be relocating to. The trouble is, is I don’t think I’ll be able to make enough from renting the condo out to justify the risk, and I’ve been told I’ll be taxed more heavily on capital gains if I ended up selling the home because I haven’t owned it for 2 years now. I pay: $964 Mortgage Per month $233 HOA Per month About $100 for Gas/Electric Per month $18 for home insurance Per month So it’s about $1315 a month for the property. Looking around online it seems other condos in the area are renting for $1300-$1400 a month. I would essentially be renting it at cost, with an extremely small to non existent profit margin especially since whatever money I would make after mortgage and HOA was paid, would have to be rolled into an emergency fund for the condo in case and when something will inevitably need to be fixed. If I were to sell the condo after running comps I’ve seen several condos in the complex that have sold within the last 180 days for $185,000. So I potentially have about $20,000 in equity which would be great! I just worry again about capital gains taxes and when I purchased the condo 10 months ago the home was listed for $174,900 and didn’t appraise at that price. So I’m nervous the bank might say it’s equity hasn’t risen 20K for some reason. I also would like to purchase my next home in the city where I am relocating but I worry my debt to income ratio would be to high and risky for me to get another mortgage. (My condos Mortgage is the only debt I have btw.) the cost of living is less where I’m relocating, and you can get more bang for your buck home wise there. I would probably only live there for 3-6 years also, before I would move back up north and then I would rent out the home I purchased there too. What advice would you suggest for this situation? I feel like I’m stuck between a rock and a hard place and might lose a little either way. I’m a new home owner and a new Real Estate Agent and am very green to investing and finances as a whole. Looking for an expert opinion to help me make the right choice. My end game goal is to be an investor with several cash flowing properties, but I know it might take me a while to get there. If you need any more information please let me know! Thanks for the advice!

[Caleb Heimsoth]

Thomas Turek could you refinance to get out of your PMI? Assuming you’re paying PMI. Likely your rate would be higher though, so it’d probably be a wash.

If you sell even with the gains you’ve mentioned your commissions and selling costs would probably eat that up and you’d likely break even at best.

You’re right about this not being a cash flow rental. If you’re lucky you’d break even. This is without accounting for repairs, vacancy or a PM.

This is why I think as young people it’s not necessarily a bad idea to wait off on buying a home. If you do that it give extreme flexibility with moving.

I moved twice last year myself so I can relate to that. That being said I also own 3 rentals but have never owned a primary. Typically to make money with a house (assuming you’re living in it and not adding major value through rehab) you have to live there 5-7 years since at the beginning of your mortgage it is mostly interest.

So with all this in mind, with the information you’ve given me, I would recommend selling your condo and renting where you live next, until you get a better idea as to where a good rental is. In the future avoid HOAs they kill your cash flow.

At 42k per year and 968 mortgage your DTI is 27 percent so you could probably qualify for one more mortgage.