Rent or buy retirement condo
Question: I am thinking of spending the winter months (3-4 months)in warm weather. I will live in my present duplex during other times. Is it better to rent a condo in a warmer clime or buy one? I see the condos I would like to rent cost between 2-3,000 per month.
Would it be better to buy a condo outright or pay rent? The places I am looking it seems you can get a fairly decent condo for 250K. Its possible in the future I might be able to pay cash for a condo. I could rent it out for some time when I am not using it.
If I buy, at least I am tying my money up in real estate which is more likely to increase in value. If I rent, I am just throwing money down the drain.
Answer: If you are looking in South Florida, the condo market is already saturated. Some lenders are already refusing to loan on condos here, for just that reason. If you don’t remember the last condo glut, let me refresh your memory. When the bubble burst, the prices dropped by about 40%. Based on that, I would rent this year and buy late next year. Keep in mind, many condos will not allow you to rent out your unit for less than a year. And then, you may only be allowed to rent it out once per year, even if your renter walks away. I’d suggest figuring out the costs both ways. Then do the plusses and minuses of each option.
As an example, at $250K, you are looking at nearly $2000 a month for payments. Then add in $500 for condo fees. That will cost you $30,000 per year.
If you rent, and pay $3000 a month, and stay 4 months, that costs you only $12,000 per year.
In the first case, it costs 2.5 times as much, but you build equity and might get some tax advantage. In the 2nd case, it is far cheaper, and you get to move from location to location every year. If you don’t like the place, you are not stuck with it.
Renting a condo is iffy at best. Your stuff is going to get trashed, and you really cannot keep personal stuff there, so you end up moving twice a year anyway. Plus the hot rental activity is in the winter, and that is when you plan to be there. Outside of the winter, the rental market really drops off. You might be lucky to get 1/5 of the winter rate if you can rent it out at all. If you were next door to Disney, that might be a different story.
I think I know what you are thinking…while you can easily afford both options, you really don’t like to spend the money. Maybe there is a cheaper option. For example, buying in one of the cheaper sub-divisions like Port Charolette or Flagler’s Village. Or going with a mobile home. Or even a large travel trailer. With the latter, you can move it around if you want to experience different locations.
Related Posts
Filed under: Bad Credit
Leave a Comment
XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
TrackBack URL | RSS feed for comments on this post.