A Condo May Present Income and Growth Opportunities

By: Victor Normand
Published: March 2013

About this time each year we like to see what is happening with the condominium market.  To begin with, we found that the overall number of condominiums sold and the number rented has remained relatively constant for the past several years.  In Acton, during the” post-bubble” period,(after Sept. 2008) about 25 to 35 condominiums priced at or below $175,000 have been sold each year, and t between 55 and 70 rented.

For the purpose of this article, we will be using a maximum sale price of $175,000.  This price is consistent with local affordable housing guidelines making this sale price within reach of family incomes at 80% of the median,  or about $80,000 per year in Acton.

As we have done in the past, we looked at both the home ownership and the investor perspective for our analysis.  The assumptions made for the study include:

  • The statistical period runs from March 1, 2012 to March 1, 2013.
  • All condominiums sold during that period under $175,000 were included and the average sale price used in the analysis.
  • The average rent for all condominiums rented during that same period was used.
  • Similarly, the association fees and property taxes were averaged for all condominiums used in the study.
  • The average mortgage interest rate for the past 12 months of 3.59% was used.
  • Rent levels, condo fees, and sale price are typically set to reflect the treatment of utility costs; consequently, no cost line item is included for utilities.

First Time Buyer/Investor Condominium  in Acton

                                                    First Time Buyer

     Investor (Cash Buyer)

Sale Price

 $116,559  $116,559

Down Payment @ 20%


Loan Amount




Term of Loan (years)


Loan Rate


Monthly Payment



 $205  $205

Condo Fee

 $331  $331

Monthly Costs

 $959  $536

Average Rent

 $1,143  $1,143

 Net Monthly Cash

 $184  $607

Annual Return on Cash

9.5% 6.2%

Given the challenges of financing a condominium purchase requiring government insured mortgages, we have abandoned that method and instead  are relying on conventional financing with 20% down for the home ownership analysis.

If a buyer is able to find a condo to purchase that meets or beats the metrics used in our hypothetical model, the economic returns are significant.  A home buyer who has been able to save up for the down payment can enjoy significantly lower monthly  housing costs and a greater effective return on the cash used for the down payment than any bank now pays on deposited funds.

The investor, who transfers available funds from any insured investment to the purchase of a condominium, will similarly see a very good return on their money.  Even greater returns might be realized depending on how an investor is able to fund the purchase.  A line of credit against other financial assets or a home equity loan usually comes with even lower interest rates than are used here.

Finally, all this good investment strategy comes at a time when condominium values are still depressed.  An improving housing market, the beginnings of easier credit and the lack of new inventory, all bode well for higher values in the not so distant future.

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