Case Study - Sell NYC condo to FIRE sooner?

[gavenny]

Life Situation: Single, age 35, living alone in NYC, but in long-term relationship. No dependents, no plans to have kids.

Gross Salary/Wages: $120,000

Monthly Gross: $10,000

401k - $1500
Employer match - $225
HSA - $20  (I know this is pathetic and need to look in to bumping it up and maxing out if possible)
Fed Inc Tax - $1515 (I overpay and get a refund)
NY State Tax - $464 (I underpay and end up owing)
FICA - $753.32
Medical/Dental/Vision - $154.22

Monthly Net - $5594

Current expenses:
Mortgage PITI - $1307 ($653.5 paid every two weeks to add an extra payment to principal over the year) which makes it $1416/month
     P&I - $1181
     T&I - $126
HOA Maintenance - $367
Utilities - $150 (includes electric, gas, and internet)
Cell Phone - $62
Metrocard - $121 (recently went up from $116.50)
Groceries - $150 (goal amount is ~$35/week)
Eating Out - $150
Entertainment (concert tix, movies, etc.) - $100
Travel - $400 (this includes visits to family nearby on bus and train and vacations)
Household goods - $20

Total Expenses - $2936

ROTH IRA - $450
Taxable Account - $2000

Remainder - $208, usually put in to high interest savings to cover gifts, home maintenance, misc for which I am not very good about budgeting.

Expected ER expenses: unknown, I’ve only just gotten started on the idea of FIRE and haven’t sat down to figure this out yet

Assets:
401K - $65,000
     90% VTSAX
     10% VBTLX
Vanguard ROTH IRA - $63,300
Fidelity ROTH IRA - $13,161
Vanguard Rollover IRA - $16,600
Vanguard Brokerage - $109,000
Cash - $52,000 (emergency fund, checking acct cushion for monthly expenses, and tax refund which is slowing being moved to taxable account)
Condo - $646,000 (estimated value, purchased for $465,000 3.5 years ago)

Total Assets - $965,061

Liabilities:
Mortgage - $208,000 remaining
Original value - $240,000
30 year fixed @4.25%

Total Liabilities - $208,000

NET WORTH - $757,061 (with condo)
                     $319,061 (cash and investments only)                     
 

Question(s):

Thank you in advance for your help! I found MMM at the beginning of the year and have been reading as much as I can ever since. Also branching out in to other blogs such as MadFientist, Jcollins, etc. Looking forward to becoming part of the FIRE community.

For a long time, buying my own place in NYC was a big goal and I worked really hard to get there, but now that I am seriously thinking about FI and hate my job, I’m wondering if it makes sense to sell. My SO and I are thinking about moving in together, but neither one wants to move in to the other’s place (he doesn’t own) because our commutes would be much longer. But the complication of finding a rent-stabilized place if I do FIRE and want to stay in NYC is weighing heavily on the decision. Obviously I’m not going to rush in to a decision here, but wondering if I should at least try renting it out and see if I can handle being a landlord, or just cut and run. If the value of the apartment continues to rise (has been flat for some time) and were to hit $750,000 I think it would be an easy decision to sell. Just looking for some other opinions.

Also, I’m trying to do more to increase my savings rate to speed up my time to FIRE and looking at it laid out, the travel budget is obviously where I should make some cuts, but working in a job I hate means sometimes the only thing I have to look forward to is those vacations. I am looking to cut this cost down significantly this year with more local travel.

According to the calculators out there I am about 8 years away from FI and even though that is nothing in the long term, it just feels so far away.

So, should I sell? And what else can I do to increase savings/reduce expenses?

[brooklynmoney]

I own a condo in Brooklyn and I debate this all the time. However, if you aren't going to leave the area then you are faced with finding an affordable place to live. It seems to me you have a good deal now so if you aren't going to leave the area then why sell? If your SO could move in with you and split the cost, you'd have an amazing deal and so would he. Also, how do you get your groceries so low??? That is amazing!!!

[gavenny]

Hello fellow Brooklynite! I'm in Crown Heights, where are you?

Groceries I do a combination of Trader Joes, Asian markets, and the street fruit/veg stand in my boyfriend's neighborhood in Queens. It also helps that I don't cook too much meat, since I'm not the most organized about cooking things on time and I was wasting a lot of money with food going bad.

I've been trying to get him on board about moving in here, but it really would make his commute pretty miserable, and I'm not convinced that dip in quality of life would be worth it. Also, I don't want him to end up resenting me for pushing that on him.

[brooklynmoney]

That's a good point lhamo about renting it out. The beauty of condos.

OP -- I am in Williamsburg (but not the trendy/super fancy part -- the more chill part). I bought 4 years ago and it has appreciated like mad. I'm trying to figure out if I should sell before the L shutdown or just keep it forever and rent it out. I'm like you in that I don't know where I want to move to which is the problem. I pay a similar amount as you do and it is DIRT cheap comparatively.

[gavenny]

If you are allowed to rent it out, I would keep the condo until:

1)  You find the dream place at the right price that works commute wise for both you and your partner -- if you are intent on finding something rent stabilized then you are looking for a rainbow colored unicorn, not just a unicorn, so this will likely take quite some time to nail down and

2)  Wait until you have lived in said rainbow unicorn for at least a year, just in case your relationship dynamic changes significantly after the move.   Some people are great together, but not necessarily compatible for living together.   

In the meantime, I'm pretty sure you could rent out your place for well over what your carrying costs are, and NYC real estate is unlikely to have a precipitous drop in value, and tends to recover quickly these days if it does drop.  You have a 2-3 year window after moving out to decide if you want to sell, during which you will be able to exclude a portion of any gain from capital gains taxes.

Thanks lhamo! This makes sense. I think it's best to forget about looking for stabilized given all our other requirements and just find something that works for both of us. That will help us save money either way, and hopefully I'll get some decent income from the rental. Ideally, once we're no longer working we can move in to the condo since the commutes will no longer be an issue.

[KungfuRabbit]

One small question.

My mortgage company has a "promotion" doing the payments every other week as well. They charge for the program though, like $150 a year or something.

If you are doing that, please stop immediately. Generally you can add extra principle to monthly payments if you want to pay it down early, or just let it ride.