Buying a studio condo a good investment? (incentive, 5%, mortgage calculator)

[IslandHoney]

I've visited this forum and found it helpful. Haven't seen any information on this topic. I would appreciate any advice from the experts.

I'm moving in a few months to save money and pay off my loan for my graduate degree. I found a studio for rent for $750. While looking for the address, I realized that it was also for sale for $75,000...HOA/Maint = $91/mth...2008 taxes = $894. Located in Jersey City, NJ a block from Society Hill. According to the mortgage calculator I used this is less than renting the space. I can pay off my loan & own a place at the same time!

BUT is buying a studio a good investment? Will I have to end up renting like this owner is doing to make my money back?

[chet everett]

Many variables. The people that want to rent vs buy may have a specific (short) time frame that the studio would work for them, while buyers would probably have a time horizon of at least 5-7 years. In that stretch of time it is fairly likely that assessment would grow significantly and the odds that taxes might also increase make this a far from certain proposition to own.

[SVTLightning]

plus if you are a new homeowner you still have time to get your 8k incentive! That will go a long way paying some bills also!

[DowntownVentura]

I won't address whether a studio is a good investment as I just don't know. I imagine it depends on the location. But I can tell you, if you think you can rent it for $750 given the purchase price, taxes, and HOA, it is a great rental investment.

I do think the Federal Tax credit is 10% or $8000 , whichever is less. This makes it even a better buy

[JohnG72]

As an investment, it largely depends on how long you intend to live there.

I don't think ANY real estate as a 3-5 year investment is a good idea right now.

I'll compare it to a 55 year old person who intends to retire at 60. That person has NO business whatsoever investing in the stock market with their retirement money. The risk is too large. A person with 20 years to go has the ability to ride out drops in the market and reach the proverbial "long run". Someone with only 5 years left might as well go drop the money on black at the roulette table.

Theres a false notion that real estate doesn't go down in value(already debunked) and another false notion that we've hit bottom because real estate has lost so much value already.

What would make your studio a good investment is

1.) You can rent it out if the market continues flat, drops, or appreciates by a very small margin.

2.) Rents continue at the same level which IMO is no guarantee due to a economy that I think will further decline.

But if you want to live there only a few years and sell, I think you are better off renting.

[rubytue]

Originally Posted by DowntownVentura

I won't address whether a studio is a good investment as I just don't know. I imagine it depends on the location. But I can tell you, if you think you can rent it for $750 given the purchase price, taxes, and HOA, it is a great rental investment.

I do think the Federal Tax credit is 10% or $8000 , whichever is less. This makes it even a better buy

That was my thought. Buy it, live in it for 3-5 years, then you have a perfect rental condo. Plan on keeping the place for 10 years or so. Fixed expenses of ~$900, in four years (assuming 5% rental increase) it should rent for $911, $950 in 5 years. You'll get the income and the tax deductions for renting it. I don't know that area at all, but if its a good area and likely to stay stable, then it sounds like a reasonable idea.

[elflord1973]

Originally Posted by IslandHoney

I've visited this forum and found it helpful. Haven't seen any information on this topic. I would appreciate any advice from the experts.

I'm moving in a few months to save money and pay off my loan for my graduate degree. I found a studio for rent for $750. While looking for the address, I realized that it was also for sale for $75,000...HOA/Maint = $91/mth...2008 taxes = $894. Located in Jersey City, NJ a block from Society Hill. According to the mortgage calculator I used this is less than renting the space. I can pay off my loan & own a place at the same time!

BUT is buying a studio a good investment? Will I have to end up renting like this owner is doing to make my money back?

What research did you do on the area ? If it's where I think it is, it could be in a really bad area (which would explain why it's so cheap).

If it's in a bad area, it will be difficult to sell it.

Smaller condos around Journal Square (still blue collar, but not a war zone) go for more like 150 or so.

[IslandHoney]

Thank you for your responses. I'm still considering purchasing a studio, but not that particular one. I drove through the area, and as the as the last poster suggested, it's not the safest. It's completely redone, has high end fixtures & is the best looking building for a few blocks. Unfortunately, the negatives outweigh the positives for this particular unit.

If I purchase a studio, I'll only stay in it for about 3 years then upgrade to a 2 bedroom. By then I'll have paid off my loans & saved/invested enough cash to make a substantial down payment. Right now I just need to find one that has a good location, I'd like to live in, & someone else will pay rent for in a few years.

[elflord1973]

Originally Posted by IslandHoney

If I purchase a studio, I'll only stay in it for about 3 years then upgrade to a 2 bedroom. By then I'll have paid off my loans & saved/invested enough cash to make a substantial down payment. Right now I just need to find one that has a good location, I'd like to live in, & someone else will pay rent for in a few years.

If you want to get an affordable place in a not-too-bad neighborhood of Jersey City, try Journal Square or Jersey City Heights. Downtown is nice too, but probably way out of budget if you were thinking of that other place.

See:

Maps - Jersey City