Yesterday I hosted an open house for Robb‘s client, who is selling her 1-bedroom condo in Shoreline. There’s a Chinese proverb about a sparrow being perfectly complete, in spite of its small size. So it is with this place. Check it out!
The HOA allows pets, a huge priority for me, personally. The deceivingly small kitchen packs in all kinds of full-sized appliances: dishwasher, oven, washer and dryer. The unit comes with an assigned parking spot. The location is great, too: right on the bus line and a block away from Costco, Petco, Home Depot and many, many restaurants.
Let’s say you put 5% down on the $199,000 list price. At today’s mortgage rates, and after taking into account HOA dues ($258/month), property tax ($1,785 for 2017), mortgage insurance and homeowner’s insurance, your monthly ownership cost would be around $1,450.
In addition, now that you no longer have a landlord, if your fridge or washing machine breaks, you’d be solely responsible for its repair or replacement.
Are there viable rental alternatives at this price range? Curbed recently rounded up a number of options. One downside to being a tenant is unpredictable rent hikes. If you buy a home with a fixed-rate mortgage, your monthly loan payments will never rise. But unfortunately there are other costs beyond your control. Back in 2016, this unit’s King County property tax assessment was $118,000. This year it’s $159,000. At Shoreline’s $11.23 per thousand tax rate, that’s a $460 increase.
On the bright side, you can deduct both mortgage interest and property tax payments on your Federal income tax.
Anyway, you put $9,950 down and take out a $189,050 mortgage. If you decide by the end of 2018 that you’d like to move, in order to pay off the $184,294 loan balance and recover your down payment, you would need to re-sell the condo for $213,454 (I’m estimating 9% in selling expenses for title & escrow, excise tax, real estate commissions and touch-ups/repairs).
If you stay through 2022, you would be able to sell for a profit at $196,997. And by 2027, your break-even point would be $172,359.
In other words, the longer you stay put, the more profitable it would be to own versus rent. But if you aren’t sure you’ll be sticking around for long? You’d have to carefully weigh the value of tax deductions against the added responsibility of maintaining your own property.