If you’re going to invest in real estate, it surely makes more sense to invest in REITS — real estate investment trusts.
There’s a shiny new high-rise in Boston. It’s strikingly beautiful, with deep blue glass that reflects the sky. The other day I drove past the new tower and saw the huge sign: “To rent or own, call …”
Curiosity got me. I dialed the number.
“Hi, my wife and I are thinking of moving into your new tower,” I fibbed. “Are you renting or selling?”
“Both. The lower 15 floors are rental. The top 15 are condos.”
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“What does a one-bedroom cost?”
“We’ve got a lovely one-bedroom on the 26th floor. Beautiful, partially obstructed view. Just a short elevator ride to our ‘Levity Lounge’ with a spa and huge roof deck.”
“Sounds great. How much?”
“How big is this place?”
“612 square feet.”
“You’re asking a million bucks for 612 square feet?”
“Yes, it’s a tight market. And these are luxury apartments with subzero refrigerators, 10-foot ceilings, a partial view of the Charles and a 24/7 doorman.”
“There’s a monthly condo fee, right? How much?”
“Is the spa free?”
“I think there is a monthly charge.”
“How much is it to rent that apartment?”
“Close to $3,500 a month.”
When I told my wife, who’s a real-estate manager, she was equally shocked. We knew prices had risen in Boston, but not by that much.
Personally, I think the Boston housing market will crash, as it does every decade or so. Prices are up about 15 percent from a year ago. But construction is truly out the wazoo, and the rents don’t seem to justify the prices. Or do they?
Take the $966,800 condo. Thirty-year jumbo mortgage rates are now 4.125 percent.
Hence, if you could borrow all $966,800, your mortgage payment would end up at $4,697 per month. Add in the $495 condo fee and we’re talking $5,192. If you rented it, you’d be out $3,500 per month before maintenance and property taxes.
Buying as investment
So, buying the place as an investment would mean paying over $2,000 more per month than renting it. That’s an annual loss of roughly $25 grand!
On the other hand, if prices were to rise by another 15 percent in the next 12 months, your investment would produce an extra $145,020!
Moreover, if inflation takes off, you’d be able to pay…