Reader Case Study - Keep, sell, rent?

[ms]

I imagine that this question will turn more into an emotional one vs a financial question.

Current condo/commuting expenses:
Mortgage: $500 every two weeks
Maintenance: $532 /month
Taxes: $140 /month
Hydro: $38 /month
Home Ins: $23.50 /month
Auto Ins: $115.50 /month
Transit: $195 /month
Toll road: $35 /month
Gas: $175 /month

Assets:
Condo: 2 bedroom - in a 5 year term mortgage, 1 year in.
It needs the floors replaced due to water damage, some paint, and I'm considering upgrading the kitchen (maybe just appliances?) for the purpose of selling the place.
Car:  paid off 2004 Pontiac Grand Am, 200k kms, not the greatest on gas

Additional factors:
1. Condos/apartments currently rent for $1100 to $1400 per month in my area.  Due to size of condo, I would guess that I may get $1200 a month for it if I were to rent it out.
2. I work 1 hour away (drive to train - 10min, take train - 25min, walk to work - 20 min).
3. I can find an apartment for rent downtown for $1133 including utilities plus $75 for parking.  This would eliminate the transit cost completely as I could walk to work.  Or I could go for a cheaper apartment further away for $900ish and either bike or transit (~$120/month) to work.  Likely, the landlord will ask for a 1 year commitment on the rental.
4. My BF lives 50km away.  He would like us to move in together but also he would like me to keep my place, as a backup.  From his place, the commute is almost two hours (drive to train - 20 min, take train - 1 hour, walk to work - 20 min).  The transit cost would go to $295/month.  I can't really work from home so this would be every day.  We haven't talked about housing costs, only that he would not expect me to pay for his mortgage.  But beyond that I don't know what other costs I would incur.  If I don't take the same train line as him then I have the option to have a 1.25 hour commute (drive to train - 15 min, take train - 45 min, walk to work - 20 min) but then I'd have to drive my car instead of carpooling.

Specific question:
Would you break the mortgage, knowing the fine would be about 3 months of interest ~1500?  Would you keep the condo empty for some indeterminate length of time, i.e. 4 months or 6 months until things settle with the relationship? Would you keep the condo instead and attempt to rent it out with out-of-pocket costs?

I am leaning toward selling the condo after I fix it up and then renting downtown.  This way I can go to my place during the week to save the commute time.  I would even be tempted to get rid of the car, just to try a car free life downtown life. 

My dilemma is that if I commit to a 1 year with a rental, won't I be losing in the long run? 

The more emotional part of this is how it would affect the relationship - which obviously I need to think about further - but if there's anyone who's gone through something similar, I would love to hear your thoughts.

[ms]

Thanks for the book recommendation.  I'll check it out from the library.

You are correct - in many ways I agree with you.  He is being overly cautious.  We've actually travelled together including camping trips and there were no problems then.  Moving in together won't happen until the end of summer, so really I'm just trying to think of all the aspects between now and then.

Thanks!

[GregO]

Would you break the mortgage, knowing the fine would be about 3 months of interest ~1500?  Would you keep the condo empty for some indeterminate length of time, i.e. 4 months or 6 months until things settle with the relationship? Would you keep the condo instead and attempt to rent it out with out-of-pocket costs?

Adding up the expenses you've listed, you are spending $1733/month for the condo.  How much of your mortgage payment goes to the principal every month?  I'd guess it's not over $500.  So if you rent it out for $1200, you are paying at least $533 every month (not including management fees, vacancy costs if you can't rent it, etc) and not covering all of your expenses.  And if you let it sit empty, you'd obviously be losing $1700 every month.  So it appears to me that the ~$1500 fee in breaking the mortgage would be the option that cost you the least if you decide to move out.  If you are losing even $200/month renting it out, that'll add up to $2400 over just one year.  Letting it sit empty is really not a good choice at all.

My dilemma is that if I commit to a 1 year with a rental, won't I be losing in the long run? 

Why do you think you'll be losing in the long run?  There are lots of 'Rent vs. Buy' calculators out there that can help you figure out which one is the best option using your individual situation.  But from what you've given, it looks like renting downtown would be a better option for you.  You are paying $600 less every month ($1733 to $1133) for rent, and you won't have your $195/month transit and $175/month in gas.  And you'll save yourself almost 2 hours every day!  That's a full 10 hours a week of extra time that you'll have to yourself.  I would guess that you might spend a little more money on food downtown, and you won't be paying down a mortgage.  But that's almost $1000 in savings every month and 10 hours!  If you take that money and invest it, it sure looks like you'd be ahead in the long run.

[cpa cat]

I don't know why you'd keep the condo as a "back up." You've made a pretty convincing case for not ever moving back into it - and if you have a tenant in there, you can't really move back in there anyway. So if you don't want to be landlady or decide the math doesn't work, then sell it. The $1500 penalty is peanuts in the long run. You'll be moving closer to work if you break up with your boyfriend anyway.

That said, his place doesn't sound like a great compromise. Extending your commute to 2 hours is brutal. Think that through. Four hours a day just to get to work. More than 1000 hours per year... commuting. And I understand your thinking: "It's not so bad because we'll be riding together most of the way." But you're wrong. It's still bad.

Just move close to work until moving in together makes more logistical sense - one of you changes jobs or you can figure out a better housing compromise. You don't have to move in together. Every day that you decide you actually want to make a 2 hour commute (x2), you can just drive to his house and see him, or meet him halfway or something.

Not living together isn't a relationship-killer. But moving in together when it makes zero geographical sense might be.

[ms]

Adding up the expenses you've listed, you are spending $1733/month for the condo.  How much of your mortgage payment goes to the principal every month?  I'd guess it's not over $500. 

Thank you for this input.  I went back to my mortgage company and as it turns out I'm putting $715 in principal every month.  So this means that although my expenses are $1733, of that about $1000 is actual costs and the rest is investment.  The mortgage is 2.89% and I just started a 5 year term on it.

If I'm not worried about the monthly cash flow, then it's still possible to keep this condo and just keep paying down that mortgage.

Oh, and I found out that my brother in law actually manages a couple of condos with his brother.  So at least I have someone to talk to in the area that has some expertise in renting.

[DoubleDown]

That said, his place doesn't sound like a great compromise. Extending your commute to 2 hours is brutal. Think that through. Four hours a day just to get to work. More than 1000 hours per year... commuting. And I understand your thinking: "It's not so bad because we'll be riding together most of the way." But you're wrong. It's still bad.

Just move close to work until moving in together makes more logistical sense - one of you changes jobs or you can figure out a better housing compromise. You don't have to move in together. Every day that you decide you actually want to make a 2 hour commute (x2), you can just drive to his house and see him, or meet him halfway or something.

Not living together isn't a relationship-killer. But moving in together when it makes zero geographical sense might be.

+1

Is there not a place you could both move that is convenient for both of you and your respective commutes? If not, I would avoid making this kind of major move on a relatively flimsy relationship commitment. If you decide you want to build a life together, then it will be time to discuss finding work/living arrangements that are sustainable for you both (I would not consider a 4 hour round trip commute sustainable at all). In addition to being miserable wasting so much of my life going back and forth to work, I can only imagine I'd start to resent my significant other because of it.

[ms]

Long overdue update: we did go with the "zero geographical sense" option.  It's now 2-3 months of 2 hours of commuting and it is tiring.  But the other news is that I'm currently expecting and should be on maternity leave starting in January.  I plan to take the full year of maternity (so that saves me from the commute) and once I return back to work we'll make major decisions on where we'll relocate.  Hopefully by then he'll also have enough seniority at his work place to be able to transfer to another team and perhaps that'll shorten the train ride to 45 mins.