Do I Sell My Condo?

[keasterly]

Hi Mustachians!
Love the blog, love all of the reader responses; I am pumped to finally be a part of the community. I'm a fairly new Mustaschian and need to do an about-face to correct errors of my pre-Mustachian life. Please help!

I currently own a condo in a popular Chicago neighborhood. I purchased it in 2010 and the value promptly fell in 2011. I lived in in for three years before relocating to another city for a new job. Now I have awesome tenants in it with a lease through April 2016.

I purchased the condo for $240K in 2010.
Mortgage/HOA/Insurance/Taxes = $2000/month
I currently collect $1600/month in rent from my tenants (fair market value and they pay on time every month like clockwork).
This puts me in the red for approximately $400/month.

Additionally, I have a special assessment from the condo association coming due in January 2016 for $13,500 for fire safety installations throughout the building. This is a mandatory assessment for all owners, so no way for me to get out of it if I still own the place when it comes due.

I know the obvious answer is that I am losing money and paying out of pocket EVERY MONTH for this place. I have not sold it to this point b/c the market value on the unit dropped dramatically after I purchased, to approximately $220,000. Fortunately, the market is steadily creeping back up, and I could probably sell my unit for $240,000 today.

One advantage of holding the unit for the past year will be the tax breaks I am able to claim. As long as tenants are in my unit, I am able to write off mortgage interest, all HOA fees, and any repair fees I incur while they are living there, so I am hoping that perk pays off.

For example, for the 2014 tax year, I will be able to write off:
HOA Dues = $4340
Mortgage Interest = $6000
Repairs (expensive year: fridge/bathroom vent/sink and dryer all broke at some point)= $760
Total expected 2014 write-off: $11,100

I will expect similar write-offs for the 2015 tax year when that comes (if I still own the place). Also, there is depreciation that I haven't even touched on but that I am able to claim each year that I have a tenant in it.

Do I sell now? Do I hold onto it for another year or two to see if the market continues to climb and my equity grows beyond just breaking even? Mustachians, lend me your advice!!! I would be forever grateful! :)

[mc6]

Is there a possibility you will ever live there again yourself?

[MrFrugalChicago]

I just sold my condo in Chicago, but my situation was different and I made aprox 20% on the place.

Things to consider:
Your total cost to sell is about 10%. So if you sell for $240k, you will actually get 216k. From this you need to pay back your mortgage. Does this pay it off, or will you owe MORE money on it?

What neighborhood? Can you see the value going up even more in 2-3 years? How about raising the rent?

I assume it is a highrise alone the lake if you are getting hit with the sprinkler assessment.

[Another Reader]

You have a $13,500 assessment coming up in a year.  What is the basis of your $240k value estimate?  Are there current sales in your building that consider the upcoming assessment?  If your estimate is based on sales in other buildings without large, looming assessments, your value estimate may be high. 

It is usually more difficult to sell a unit with a tenant, unless investors make up the bulk of the market in your building.  Have you discussed selling with knowledgeable agents that work in that area?

Whether I would sell today in your shoes is difficult to answer without a solid value estimate and more information about your financial situation and the mortgage.  I would be looking to sell at some point, because the unit will continue to be significantly cash flow negative for the foreseeable future.  In your shoes, I would extract the equity by selling and look elsewhere to invest as soon as a sale made sense.