Moving into a 400 s.f. condo?

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Moving into a 400 s.f. condo?

Postby InvestorNewb » Thu May 09, 2013 5:03 pm

Hello,

I found a condo (currently being built) for sale in my area for 200k but it is only 400 s.f. and doesn't have a balcony or separate bedroom. It's in a main city downtown and close to transit, so I'm thinking about getting it. The condo fee would only be $200/mo. based on the size of the unit.

I would put down 100k and carry a mortgage for 100k. I'm basically tired of writing a check for 1000/mo rent and could reduce this to 700/mo. or so and actually be putting it towards owning something. Once it's paid off my savings rate will really increase.

Does this seem like a good idea ? Or am I basically 'writing off' finding a wife/having children one day by getting a unit this small. Also, are studio apartments hard to sell ?

The unit is also on the top floor (right below penthouse). The view isn't the greatest but it would still be decent, I think. Oh yeah, there is also no balcony. It won't get any cheaper in my area.

Thx.
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Re: Moving into a 400 s.f. condo?

Postby Call_Me_Op » Thu May 09, 2013 5:05 pm

Nothing to do with finding a wife or having children. If that happens, you can move to a bigger place.
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Re: Moving into a 400 s.f. condo?

Postby Rob5TCP » Thu May 09, 2013 5:07 pm

I lived in 250 sq. feet near the UN for over 7 years and loved it. If it's well laid out (I had a Pullman kitchen and Murphy bed) which helped.
I was on the 22nd floor with a good, but not great view.

If your in a good area and plan to stay at least 5 years, it SHOULD turn out to be a reasonable "investment".
As to whether 400 SF is enough, only you can make that determination.
What city is this in?
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Re: Moving into a 400 s.f. condo?

Postby German Expat » Thu May 09, 2013 5:52 pm

I would do the math, if you pay 1k rent per month the condo might cost you more money and you will have transaction costs when you eventually sell it.

For your total costs you will need to add taxes, insurance and home owners fee to the mortgage and the opportunity costs of the 100k you are putting down. Also you will need to cover repairs inside your condo (water heater, dishwasher etc.) and need to budget a small amount for it as well.

Comparing a 200k condo to 1k rent is a close call. Do you get any other advantages, e.g. are you in a nicer location ?
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Re: Moving into a 400 s.f. condo?

Postby psteinx » Thu May 09, 2013 8:51 pm

Keep in mind that even with the $200K investment, he's still gonna pay $200/mo condo fees.

So, for $200K (some financed with a mortgage, some out of pocket), he:

Reduces direct monthly expenditures by $800 (aside from mortgage payments)

Good:
Gains more control over his living expenses (i.e. if the area becomes more popular, his rent won't go up).
May enjoy being an owner more than being a renter (many do).

Bad:
Locks himself into a particular living situation - location and size that may not be very suitable if his family situation changes (i.e. he gets married) or if his job situation changes (new position inconvenient to the condo).
May have some additional, irregular expenses for maintenance, special condo assessments, etc.

Unclear:
Is the condo itself better or worse than his current apartment?

And finally, the financial:
$200K for an $800/monthly savings seems pretty thin to me.
Is the condo likely to appreciate, stay flat, or go down in value over time?
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Re: Moving into a 400 s.f. condo?

Postby Qtman » Fri May 10, 2013 5:40 am

Micro homes are increasing in attractiveness. If the unit is in a good area of the city, many boomers are moving to cities in retirement for ease of travel and close to amenities. If you buy, you will own it, which I view as a forced savings. In the future you could possibly keep it and turn it into a rental.

We have done some amazing remodels on small homes, <900 sf. You almost have to think like a boat owner.

The main issue from years of real estate ownership including many rentals and condos is the financials of the condo association: reserves, any special assessments?, if so when and what for? Who is on the board? Do they have any experience in maintaining a building? What is the mechanical plant like? Well maintained or barely getting by due to cheap board members?

Bottom line, if the location is good, there should be demand in the future if you want to sell.
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Re: Moving into a 400 s.f. condo?

Postby Frugal Al » Fri May 10, 2013 6:54 am

I like the guidelines William Bernstein mentions in The Investor's Manifesto: Don't pay more than 12.5 to 15 times annual rent to buy a property. What would your prospective condo rent for? Does the $1000/mo you currently pay for rent include a condo fee? What will property taxes cost if you? You're single and it sounds like you've got life changes ahead of you at some point in the not to distant future. It also sounds like you doubt this place will fit in with those changes. The rent you currently pay does not seem excessive for an urban center. If the condo is fairly priced (including strong association finances/reserves), you love the place and the lifestyle it offers, and plan to hold it at least 5 years, then buy it. It may or may not turn out to be a reasonable choice--every real estate market is different. But don't buy it because you think it's an investment or just because you think it might save you money in the short term, unless real estate investment is your business.
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Re: Moving into a 400 s.f. condo?

Postby psteinx » Fri May 10, 2013 9:24 am

Ooh, that's right - property tax.

Add property tax to the monthly condo fee, add in a bit more allowance for maintenance or for the possibility of at least occasional special condo assessments, and the "savings" vs. the $1000 you're paying now may shrink considerably.
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Re: Moving into a 400 s.f. condo?

Postby Random Poster » Fri May 10, 2013 9:54 am

InvestorNewb wrote: . . . and doesn't have a balcony . . .

* * *

Oh yeah, there is also no balcony.


It sounds like you want a balcony.

Accordingly, I'd pass on the unit.
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Re: Moving into a 400 s.f. condo?

Postby German Expat » Fri May 10, 2013 10:11 am

Balcony would not matter to me, I have a small on on our 630 sqt condo and I never use it. If I want to sit outside I stroll to a restaurant or I go to the roof top deck of the building. Most of the times (like mine) the balcony's on smaller condos are too small anyway. Mine can sit 2 persons and a (small) table. The only useful thing about it is that I have a nice large french door and I can open it and let the air and sun into the room.
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Re: Moving into a 400 s.f. condo?

Postby jridger2011 » Sat May 11, 2013 11:56 am

400 sq ft is really small in my opinion. Would this building have storage units to rent, parking spaces to rent, or other conveniences such a front desk staff to accept packages?

A slight problem with some of these smaller units that are condo in major downtown areas is people tend to rent them out as hotel rooms for profit. Check to make sure this cannot happen if you plan to live there and would be bothered by it.
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Re: Moving into a 400 s.f. condo?

Postby jbreittling » Sat May 11, 2013 2:24 pm

I wouldn't do it unless I knew or felt very, very confident I could sell something so small with so little to offer (no balcony, an 'ok' view, paying $200/mo on top of your mortgage for I assume garbage & sewer?). Also keep in mind when or if it is time to sell, who will be your demographic? It sounds pretty narrow to me.
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Re: Moving into a 400 s.f. condo?

Postby Watty » Sat May 11, 2013 2:46 pm

There is a wiki you should check out;

http://www.bogleheads.org/wiki/Owning_vs_Renting

If your current apartment is not the same then be sure take that into account.

A big factor that people often overlook is that once you buy then you are much less mobile in your career. I have seen promotions and job offers go the person who could relocate the easiest.
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Re: Moving into a 400 s.f. condo?

Postby Kriegsspiel » Sat May 11, 2013 5:58 pm

Rob5TCP wrote:I lived in 250 sq. feet near the UN for over 7 years and loved it. If it's well laid out (I had a Pullman kitchen and Murphy bed) which helped.
I was on the 22nd floor with a good, but not great view.

If your in a good area and plan to stay at least 5 years, it SHOULD turn out to be a reasonable "investment".
As to whether 400 SF is enough, only you can make that determination.
What city is this in?


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Re: Moving into a 400 s.f. condo?

Postby ossipago » Sat May 11, 2013 7:20 pm

400 sq ft is not that small for a single person in a nice location. Your amount of belongings shrink or grow to fit your living space, to some extent. You'll be surprised what you consider essential and how much you consider unnecessary if you move to a studio.
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Re: Moving into a 400 s.f. condo?

Postby VictoriaF » Sat May 11, 2013 7:23 pm

Based on the price alone, the current apartment at $1,000/month seems cheap enough not to rush into buying a condominium.

Does the condominium come with a free parking? Is it possible to live in it without having a car at all? Is there difference in the transportation access between the current apartment and the condominium?

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Re: Moving into a 400 s.f. condo?

Postby halfnine » Sat May 11, 2013 10:48 pm

InvestorNewb wrote:I found a condo (currently being built) for sale in my area for 200k but it is only 400 s.f.

Have you lived in a 400 sq ft place before?

InvestorNewb wrote:and doesn't have a balcony or separate bedroom.

Is this common for the area? Are the other features (kitchen, bathroom, etc) comparable to similar sized places in the area? (I rented a place thats kitchen was criminally small even by small standards. Accordingly it was a lot cheaper to rent. Fine for a short period of time under my particular circumstances at the time but certainly wouldn't have wanted to have owned the place.)

InvestorNewb wrote: It's in a main city downtown and close to transit, so I'm thinking about getting it.

How big of a main city are we talking about? Is public transport the way most people get around in your location? Does it have parking? Is parking important for the area? (I have lived in quite a few major cities around the world where 200k wouldn't get one 400 sq ft. On the surface, that makes me wonder whether the demand for such a small place is really that great in your area)

InvestorNewb wrote:Does this seem like a good idea ? Or am I basically 'writing off' finding a wife/having children one day by getting a unit this small.

Well, it may help prevent you from marrying the wrong woman :D
How many years until you would even consider having kids? (I managed in a 370 sq ft place with my wife and child until the child began to crawl at around 6 months then it was time to move)
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