Quick history: We are currently living off of my husband's salary and using mine to pay off our student loans in the next 4-5 years. We decided to keep renting instead of buying because we aren't ready to commit to such a large purchase for longer than 5 years. While looking for a new place to rent, we found a spacious 1 bedroom condo for $650/month, including a boat slip, so we no longer have to pay our $1,000/month rent and $100/month boat slip. Awesome right? Well, we also found out that there are condos selling in that community for $20,000-$40,000! My mother in law offered to loan us the money and we can pay her back in the next 5 years at about $700/month for a $42,000 condo (top price range). Here's the problem: the HOA fees are $300-400/month, then we estimate at least another $150 for property tax and homeowner's insurance.

Question: Do we buy one of these condos? In 2004, they were selling for about $100,000 but now they're valued around $40,000-ish with some selling for as low as $20,000. We'd have it paid off in 5 years BUT we'd still have the HOA fees, etc. If we can't sell it when we want to, we may be able to rent it. (The condos for sale are 2 bedrooms, not 1 bedroom like the one we looked at renting) We could probably rent it for about $800/month, but we'd only profit like $300 after fees.

The alternative is to rent the other condo for $650/month, saving us at least $400-600 from what we're currently paying in rent, utilities, boat slip. That extra could go towards paying off our student loans faster.

Isn't the main point of buying that you're "throwing away" less money?

If you buy, you're going to be spending almost the full cost of renting and getting nothing for it that you wouldn't get by renting. And then on top of that you'll be taking on debt, paying another $700 / month and taking on the responsibility of dealing with the property if you move. What is there to gain from buying?

Think about it like this. If the cost of HOA + tax + insurance is $550, and your rent is $650, then effectively your rent is $100 and you're just paying the HOA + tax + insurance through a middle man. So it's $100 / month rent, or $700 / month buy. What is the extra $600 / month getting you?

I don't know. It sounds lie a reasonable deal to me. If you look at where you'll be in 5 years it doesn't seem so bad.

I'd also check the figures for insurance and taxes. $1800 a year seems awfully high for a $40000 condo. We pay $250 a year in insurance and $3000 in taxes on a condo valued at more than ten times that much. If your figures are correct then the high taxes and insurance could explain why the prices are so low.

Would this be in hurricane country? If so then, by being (apparently) on the water you will also be taking on a huge amount of risk of total loss.

Plug the numbers into the NYTimes rent vs. buy calculator (you'll have to use advanced settings):

http://www.nytimes.com/interactive/busi ... lator.html

If you use 2% for housing price increase, rent increase and inflation (in other words, assume prices will stay constant with inflation), buying is better, but only after 5 years, and it's only the tiniest bit better even 30 years out.

Where is this condo? I am concerned there is something else going on. Where we have our condo there are some complexes that are known to have serious issues - things like major renovations needed. Prices are severely depressed because current owners don't want to pay for the repairs and are trying to get out before the HOA fees skyrocket to pay for the renovations.

It's not the kind of thing you can just look up though. I would be careful and talk to several current owners before buying.

There is another complex less than a mile down the road with similar prices that we are looking at. The area is actually a decent neighborhood, right on a river and that's how they have the free boat slips for tenants. But we'd get the free boat slip if we rented too.

What part of the country? I appreciate you want to maintain some privacy. But there are special things going on in various areas that might make a huge difference. Maybe if you post the state then people can give you some specific advice.

Oh sorry, Jacksonville, FL

Although I'm not a number cruncher, I think it's too close to make the potential risks and the transaction costs worthwhile. I would recommend against purchasing the condo.

Thanks everyone for your input! We have decided to rent after speaking with a realtor who told us there are a whopping 24 active condos at one of the places and nearly as many at the other. We aren't willing to risk assessments and other condo problems.

Great question with regards to the condo being so cheap and high taxes form doing your homework. My first thought was the economic downturn was the result of the condo reducing $60k in the last 7 years. If that is the case and it the economic downturn for the reason of the low price then I would buy because in the future there will be a upturn and the value will increase and by then you may want to sell?