Case Study: Sell or Rent?

[sakamencho]

(Edited for clarification): I own a condo unit that I've been renting out for the past few years. Should I keep renting it out, or am I better off selling it and investing the money elsewhere? Thank you in advance!

Market Value: $215,000
Original Purchase price: $160,000
Original Mortgage Amount: n/a (bought with cash)
Interest Rate: n/a
Mortgage Term: n/a
Term remaining: n/a
Amount remaining on mortgage: n/a
Gross Rents: $1,350/mo. ($16,200/yr.)
Principal and Interest (the P&I of your PITI - should match with the above info): n/a
Taxes and Insurance (the T&I of your PITI): $861/yr.
HOA costs: $449/mo. ($5,388/yr.)
Deferred maintenance notes: n/a

[Papa bear]

Sell it. It’s rents don’t justify its current value. In other words, it’s worth more as someone’s home than it is as an investment. 

Sell it, take your tax free gains, and either buy a better rental or invest the money elsewhere.

What makes this even worse is the astronomical hoa fees you have.  Plus where in the word are you that your taxes AND insurance are only 860/year?  Tax abatement? For how long? Do you get a discount on taxes for owner occupied? Or are some of your costs rolled up into your hoa fees? 




Sent from my iPhone using Tapatalk

[sakamencho]

Thank you for the advice, Papa bear.

I live on the island of Oahu in Hawaii, where the tax rates are set by the City & County of Honolulu. My tax rate is $3.50 per $1,000 net taxable property:

https://www.realpropertyhonolulu.com/media/1544/ratesfy19.pdf

If the condo were my principal residence, I'd be eligible for an exemption: I'd be able to deduct $80,000 from the assessed value of the property and pay taxes only on the balance. If I were 65 years and older, I'd be able to deduct $120,000 from the value.

[Papa bear]

So is it currently a rental or are you getting the property tax break right now? 

What I’m asking is, is your taxes and insurance rate that you quoted, will those stay constant if you turn this into an investment property?  Normally, these items go up as insurance get more expensive


Sent from my iPhone using Tapatalk

[Papa bear]

So is it currently a rental or are you getting the property tax break right now? 

What I’m asking is, is your taxes and insurance rate that you quoted, will those stay constant if you turn this into an investment property?  Normally, these items go up as insurance get more expensive (liability premiums go up, you may need umbrella insurance, lost rent insurance etc) and those great owner occupant tax breaks go away. 


Sent from my iPhone using Tapatalk

Sent from my iPhone using Tapatalk

[sakamencho]

It's currently a rental, so I'm not getting any property tax break.

[theoverlook]

Wow, the taxes being so low make the HOA seem totally reasonable. I agree that it doesn't look like a great investment at the moment. The cashflow from it does not justify the $200k in value wrapped up in it. It's hard to believe that anything in Oahu is "only" $200k - sitting here in Ohio that looks like a really good deal to live in paradise.

Then again my idea of paradise is more big island than Oahu.

[sakamencho]

Thank you for the second opinion, theoverlook.

The condo (2 bedroom, 1 bath) is located in Makaha, which is a very remote area of the island (bad for commuters, good for retired surfers/golfers), hence the $200K price.

You can get condos in Waikiki for the same price, but they're usually hotel rooms (250-350 square feet), sometimes with much higher HOA fees (depending on utilities included, amenities).

Off topic: For anyone interested in browsing Oahu real estate listings, I recommend OahuRE: https://www.oahure.com/ . Just be aware that some of the cheapest listings will be parking spaces and leaseholds (paying the purchase price locks you into a guaranteed monthly rent for a certain number of years; when the leasehold expires, you no longer own the property). Full-ownership listings will be labeled as "fee simple."