It didn't take us long to find the property that I was looking for. It turns out that there were three condos that were all competitive. One was asking $105,000, one was asking $102,500, and one was asking $96,000. The cheapest place, as you would expect, required a lot of work. The most expensive actually appeared to be lower quality than the middle-priced property. That made it easy to eliminate. We put that aside and only look at it if the negotiations for the $102,500 one went sour. This middle-priced property had almost everything going for it. It had some nice extras, good paint, great staging (the couple just lives like Martha Steward as it was their stuff), newer appliances, etc... the works.
That left a choice between two properties. The real estate agent saw what was coming. I love a good bargain and I thought that we could get the cheap one even cheaper, fix it up and have a great property. It was a better layout (in my opinion) and it was a little bit bigger, so when everything was done it would be one of the better places in the complex. (This would be due to the "newness" of everything, we weren't going to put SubZero fridges in or anything). My wife, on the other hand, definitely preferred something that was already "done." Even though I'd be doing most of the calling with contractors, such things do inevitably bleed into her workload.
We went to lunch, where I surprised my wife by saying that she was completely right in going with the polished property as our first choice. It's good to be able to surprise her after ten years. We're already pretty busy people with the aforementioned tenant problem and the new boy coming. If we can get 80% of a great deal for 5% of the work, it beats 85% of a great deal for 60% of the work. (Hopefully that sentence makes sense to others and not just in my own head.)
My wife confessed that while she was previously a little nervous about the whole idea of an investment property, having a move-in-ready (or is it "rent-away-ready"?) property definitely made it seem better. We decided that we'd look at the cheaper place as a back-up only if negotiations went sour. Back at our real agent's office we debated between placing a bid at $95,000 and $97,000. The sellers had given several signs that they were eager to move on, so we went with the $95,000 starting offer. To our surprise, they took it, no questions asked!
We've still got a few minor hurdles to cover for the closing, but nothing that's a show-stopper yet. When all is done, we'll have a place with a very sweet 6.05 price-to-annual rent ratio. If you read my previous post, you'd know that this is extremely low, which is a very, very good thing for building a real-estate empire. I'm keeping my figured crossed.
My real estate agents' husband, who is also an investor, brought up an interesting question about investing in condos. He prefers 2-families and 3-families that have no monthly condo fees. He was wondering why we'd want to pay those, which directly cut into the profits. I explained that we don't mind the condo fees. They go towards things like roofs, exterior paint, driveways, snow removal, and landscaping that we'd otherwise have to pay for... and manage. In many ways the condo fees gives us half of a property manager. In addition, condo fees go towards amenities like tennis courts and swimming pools, that some tenants are looking for. Our real estate agent supported the decision adding that the properties that we have attract a higher quality of tenant, those starting families, than the ones they had. It was a great discussion though, and one worth considering if you are thinking about investing in real estate to rent.
Update: We were able to close on this property, but there were some last minute title issues that were thankfully solved by my favorite Massachusetts real-estate lawyer, who has guided me through a few purchases now. I hadn't had a title issue in the past, so I presumed that step in the process was a little like throwing money away. Turns out it is money well-spent.
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