Condo purchases/homeownership/etc

Anyone here in residential real estate want to give me free advice that isn't tinged with "yeah I'll tell you all about everything, but buy my clients apartment"?

I'm looking to buy a condo in chicago's gold coast for under 250k. I've found a couple of great candidates and I've also created a model to give me an idea of my cashflows, particularly as juxtaposed to the rent payments I'd possibly be making. This is for one of them. All numbers are in 1000's.





I've done a reasonable amount of research but there's still some questions:

1.) Are property taxes completely tax-deductable? How is this figured on your taxes? Do I just subtract say, 3k from my tax bill of say 20k?

2.) How is life as a landlord? In several of my models I assume that I live in the place for 2 years and then rent it out at the current market rate (bad assumption, but keeps thing conservative)...

3.) Would you ever put an offer for a basement unit? It's not completely underground, but there are only 3 windows and they are about 1x2 feet each. The rest of the apartment and the location are awesome. They say it's all about location, right?

4.) Is it appropriate to low-ball as a first offer? If their asking price is 218k (basement unit) and it's been on the market for 1 year, and been reduced from 240k, would it be at all appropriate to bid 185k?

5.) What types of things should I look out for when putting in a bid? I'm a first time buyer.

6.) For the mortgage, I need to get a note from my employer saying that I'm working and making XXXX dollars. Anyone know what that's called? Checked google couldn't find anything.


These are more or less the questions I still have after searching google, btw.

Anyway, any help would be massively appreciated, as I'm looking to put an offer on some of these places in the coming week.

Thanks,

David.

It's a good point that I considered - but assuming that I put my downpayment at a relatively riskless rate of about 5% for 3 years, I'd end up with $11,618...chump change. Even assuming my discount rate of 9%, I'd have 13,000 at the end of 3 years. Also, owning a place gives you plenty of opportunity for investment (invest in the property), as well as tax benefits (this is one of my questions - how do I quantify my tax benefits). In the calculations I assumed a 4k buying cost and 10k selling cost. My model ends in 3 years, true, but that doesn't necessarily mean that I will sell in 3 years. If I can find a tenent to service the remaining mortgage, I'd certainly keep the place as a rental property (hence my question about being a landlord). In the end, I haven't decided yet whether I want to own a place or not, but I think the answers to the my questions might help me figure that out. Also, as it stands now, the NPV of renting is (34,590) whereas to buy the apartment is (25,200), assuming that I put in no improvements and need to fix nothing (or get slapped with special assessments).

I understand your position - real estate prices haven't fallen as quickly as they ought to considering that residential housing has slowed so much. But I think that housing in large cities pretty much remains fairly constant if not grows. As one of the fastest growing large cities in the country, Chicago seems like a fairly good investment. Also, as long there's nothing catalysmic (atomic bomb, etc) I'm pretty confident that it won't be a huge money losing endeavour. Also, renting for the next 3 years at 1,100$/month would be just like throwing money away. So, I think investment wise it's not too risky, and then as for the down payment, the 10 grand won't exactly be missed too much...right now it's just sitting earning a paltry 5%.

Ambulence chaser, thanks a ton for your input - that was really helpful. I've amended my model to include both the property taxes and the associated tax benefit from the tax (I said my marginal tax rate was 35%, a reasonable assumption for a 55k income). I'm tending farther and farther away from the basement unit. The assessments and taxes are really cheap and while the current asking price is almost 25k greater than the high rise that I'm looking at, the monthly cashflow is actually less. The agent told me that there "was some room for movement in the price", which makes me think that I could get a 'bargain basement' price on this hehe pun intended. But it's a basement unit for godsakes!

Oh and I was thinking of a 30 year fixed, I assumed 6.4% because while I have perfect credit I don't have a very long credit history. Oh and as for the payroll document, I haven't yet started work so would it still be possible to get some documentation from my soon to be work? How would I go about getting said document from my work? Would a copy of my contract work? D.

How is that true? If one of your neighbors sells for lower, it shouldn't necessarly affect the price of your condo because pretty much everything is fluid in the market - meaning they might get slightly below market, but if the people wanting to buy your place are very interested, they'll pay at market or above. I know a couple buildings where someone sold for 185 another sold for 230 - but there was a difference of floor, quality, etc. Basically if someone sells for less, it just means that they have a worse apartment than what you have...there's very little comparables in the condo market such that a 20k difference can't be accounted for. Your prediction for the housing market is pretty negative. Most people who have those interest only loans have already defaulted (heard about all the subprimes going bankrupt? Yeah that was everyone falling out). You don't have to wait for a mortgage expiration to declare bankrupcy. With my predictions it would be pretty hard to fully fund the mortgage payment + fees, but since I'm planning on staying in chicago for a couple years, and with my bonsus & other payments coming in over that time, I'll be able to pay down the mortgage and rent at or at least around the payment. Nonetheless, if I move back to the west coast in 4-5 years, I'll probably sell the apartment anyway. I simply can't buy something that I want to stay in for the next 15 years because I'm 21 and will definitely move out of chicago before I'm 36, so help me god But thanks for your input.