A client recently asked us to help them analyze an investment opportunity.  Their neighbor had decided to move and they wanted to see if it made sense to buy their condo and then rent it out.

It’s a win-win scenario: the seller saves transaction costs (that can be passed on to the buyer) and they don’t have to prep their home for “show condition.” The buyer can get a better price and get an investment property just a couple of floors down.

The investment analysis was straightforward – we just compare probable rents to known expenses. 

But the more interesting part was the financing.  How would that work?  How much would they need to put down?  Would the condo association allow them to buy it?  Would the bank give them a loan?  When it comes to financing the purchase of a non-owner occupied condo, the details matter.

Here’s an excerpt from our memo on the subject.