condo advice..

[Rich_in_CT]

$218k purchase price and $1500 monthly rent?  NEGATIVE CASHFLOW!  Run don't walk from this dog if that is your plan for it.

[doogan]

are there other options to make money from this deal..?

[Rich_in_CT]

Other than keep looking? 

[doogan]

Cheers Rich - I guess it pretty obvivous

Happy turkey day everyone 

[Dave T]

You have to figure out the maximum price you can pay and still have the property meet your cash flow and return on investment criteria.  A quick rule of thumb here is to take the average market rent for the property and divide that by two.

Divide that number by 1.25.  The result will be the maximum monthly mortgage loan payment you can afford to pay and still have the property adequately cash flow.  When you know what your maximum monthly mortgage payment can be, use your financial calculator to determine the loan amount (enter PMT, interest rate, and loan term, solve for PV).

Add to this loan amount whatever downpayment your lender will also require and you have the maximum purchase price you can afford to pay and still make the property cash flow in your market.

Using a market rent of $1500 per month, the maximum loan you can afford is $100K on a 30-year fixed at 6%.  If you are doing 80% LTV financing, then the maximum amount you can afford to pay for this property is $125K.

Since this number is less than the owners owe on their mortgage loan, then the sellers have to ask the lender to approve a short sale for whatever amount you are willing to offer up to a maximum of $125K.

If you have to pay more for the property, or you don't have the cash on hand for the down payment, then the deal will not make good business sense.  In this case, pass and find a better deal