Keep or sell? Convince me to decide and act.

[BlueHouse]

I've been having a hard time deciding what to do with this. 
I own a Condo in Reston Town Center (VA).  I bought it for $350K.  I could probably sell it now for $300-315K.

Here's a similar condo for sale:  (not mine, but same model).  http://www.zillow.com/homes/for_rent/Reston-VA-20190/house,condo,apartment_duplex,townhouse_type/65731573_zpid/66276_rid/days_sort/38.96124,-77.357692,38.956001,-77.366382_rect/16_zm/?view=map

Mortgage PITI = $1530/month  (~$250K remains on mortgage)
HOA dues = $330/month
Rental income = $1600/month 
Monthly loss = ($260)

considerations:
1.  Metro station recently opened 1 mile away.  another metro station 2 blocks away is slated to open in 2018.  This development seems to be spurring quite a lot of growth for the station 1 mile away.  I expect even more growth when Metro comes to the Town Center, as it was designed to be a walkable urban core with interesting retail and restaurant/night life.
2.  I currently live in a 4 floor row house.  Due to genetics and a recent accident, I expect arthritis may make living in a row house uncomfortable within the next 10-15 years.  Having a less expensive place to return to has been kind of a "plan B" for me.  I have no plans to move back there within the next 5-10 years though unless something catastrophic happened.   
3.     I have a great tenant who keeps the place immaculate.  He's been there for 3+ years and I've never raised the rent. 
4.  If the tenant decided to leave, I think I would put the place on the market.  But I feel like I've got a good thing going right now while I'm waiting to see if the market will ever recover to the price I paid for it.
5.   The thought of another problem (plumbing, etc) makes me nervous and I hate having to hire workmen for maintenance/etc.
6.  The condo is now 9 years old.  I suspect some expensive things may start to break.  I hate the thought of losing even more money on it.
7.  Everyone - EVERY.ONE. who knows the area or who lives there says "never sell it". 
Can they be wrong?  Is it really going to explode in price?  If I could get back what I put into it, I'd gladly be rid of the stress.  Why do so many people (especially the ones that live out in that area) love it so much? 
I felt like I had a good plan 2 years ago -- to get a renter and wait out the market, but I feel like the market has now recovered from the GFC.  Any further growth would be attributed to the metro accessibility.  Will the value continue to increase?   
Specifically, here are my questions:
Should I wait a little while longer and then sell? 
Should I wait until I know my own health situation to see if I'll need that place for myself again someday? It might make a good retirement home base once it's paid off. 
Should I wait until the tenant decides to move on and then reassess to see if I'm comfortable being a landlord with another tenant?
Should I increase the rent immediately?  If so, how much without risking him leaving? 




6. 

[Dicey]

As a landlord, I'd consider three things.
1. Buy a home warranty to cover potential maintenance issues. (I'm not a fan personally, but it could give you relatively cheap protection and peace of mind.)
2. Raise the rent, but discuss the amount with the tenant first. Say you don't want to sell, but you're negative and if they want to stay you need to ease some of the pain. If your tenant is as great as you say, they may be willing to pay more, particularly as they've had far longer than any renter expects without an increase. Unconventional approach, but with trusted tenants, it's worth a try. If they don't respond positively, then consider selling the place.
3. After taxes, are you really losing $260 a month? You could say that the $260 (or whatever the after-tax number is) is keeping you from having to take a huge loss on the sale. BTW, pay no attention to Zillow estimates. Check for actual recent comps on the internet. Do the same for rents. You could be underpriced after three-plus years of no increases.

Personally, if the property is as desirable as you say it is, I'd consider waiting out at least the next presidential election cycle, if not the new Metro station.

[pagoconcheques]

Keep it for now.  I live in the DC Metro area and know from experience that there will be a demand boost after the next presidential election.  Reston (motto: "We're not working, we're Reston.") may be a bit far out for that traditionally but I think the Silver line effectively changes that permanently. 

Whenever there is a new administration in the White House there will be a flood of people moving to DC and those that moved here with the last administration typically stay because they like it, have burrowed into permanent positions in government agencies, or have kids in the school system and don't want to move. 

I say put it on the market in early spring 2017.  I do think there is some risk that interest rates will rise and impose some downward pressure on housing prices, but I'd take the risk.

[mozar]

It might be a good idea to wait until the metro opens and then try to sell. I think northern virginia has good fundamentals BUT is/was overly dependent on the department of defense, which is shrinking. Since you say you are stressed, I would sell it now, because I think you have to be a certain type of person to enjoy being a landlord. Even with taking a loss you will make more money by putting the proceeds in the stock market and it's easier to manage.
Say you wait until the metro opens and you've lost $230 a month for three years which is 8k and then with the metro opening you were able to sell it for 8k more. Is that worth it to you? No, nothing is going to explode in value. That never happens. When people say real estate is going to explode its because they don't understand the opportunity costs of not being in an index fund. I think real estate can be a part of a portfolio if that's what you want, but its basically a job.

[Dicey]

...you will make more money by putting the proceeds in the stock market...

No, nothing is going to explode in value. That never happens.

When people say real estate is going to explode its because they don't understand the opportunity costs of not being in an index fund.

Hey, mozar, can I borrow your crystal ball, please?

Seriously, the one thing that is guaranteed in both real estate and the stock market is that they will go up and they will go down. When and how much is anybody's guess. There are no absolutes, only history. As they say in the ads, past performance does not guarantee future results. BTW, there are opportunity costs of not being in real estate, too.

[mozar]

OK, since you are going to cherry pick my comments Diane C.

...you will more likely than not make more money by putting the proceeds in the stock market...

No, nothing is likely going to explode in value. More likely than not that will never happen.

Oh gee, MMM just wrote a handy dandy article to back up my point.
http://www.mrmoneymustache.com/2015/07/02/if-you-wouldnt-buy-it-you-should-probably-sell-it/

[BlueHouse]

Thank you so much for the responses. I'm surprised but relieved to see people saying hold on to it. When I submitted my original reader case study, every person who commented on it recommended selling it asap due to the numbers. The responses here give me hope that maybe the location really is what makes the difference. My original plan was to hold until 2017, when metro was originally planned for completion, but with the slip date and the impending rise in interest rates, I've been getting nervous. I hadn't even considered Pegging it to the election cycle. Thanks for opening my mind  to that! 
Waiting it out a bit longer is the easiest course of action for me, but I do feel I lucked into the perfect tenant and I'm afraid to mess it up.
Any recommendations on how much to increase the rent?  When I first rented it out, I had the highest rent in the building to date. now I see others with higher rents. The only thing they have that I don't have is SS appliances (and don't worry, I'm not considering buying them). What do tenants typically find acceptable with rent increases?  $50/month? 
To diane c :  can't claim the loss due to income restrictions. I do offset income with expenses though, so at least it's mostly a wash and of course, itemizations, but yes, the monthly loss really translates to a yearly loss.
To Mozar:  in 2012, sales were going for around 250k, so the 50k increase in potential sales value has more than made up for the 5k I've spent holding it these past 3 years. If the value increases back to original price where I bought it, I'd be ecstatic!  But like Diane says, my crystal ball is cloudy. 
Thanks again for the great responses! 

[Faraday]

Not a lot of nutrition in this thread. Can I throw a little data in the mix, please?

1) Interest Rates: They are going up. VERY SLOWLY, but they are, both the APR and the points are rising ever-so-slightly. I've attached a photo of a table of "estimated loan rates" from my own lender. You can see and use this table of rates at www.provident.com .  My personal expectation is that these rates are as high as they get this year and will twiddle downward, bottoming out in Jan-Feb of 2016.

I'm planning a refi in the Jan-Feb 2016 timeframe. So this is not idle chit-chat, it's the bet I'm personally making as well. After 1QCY16, no idea.

2) What do you know about your renter? You didn't say much about your renter's financial situation. Has their income been going up for the past three years while you've been gypping yourself out of rent increases? Is their job stable or affected by the election? Employed on contract or long-term? (BTW: use of "their" is grammatically incorrect but I'm trying to avoid pronouns...)

Your renter is enjoying the benefit of your new condo, new appliances, and they are smart enough to know that has value. That's why they are a great tenant. You talk about being "lucky" you have a "great tenant", well, the tenant is "lucky" to be using up the newness in your property, also.

3) You expressed a lot of anxiety about the condition (and potential costs) of the systems in the house. The key systems besides the normal kitchen appliances are the water heater, HVAC and roof. Can we talk about that?

The home I myself live in is around the same age as your condo, coming up on 8 years old now. My appliances, water heater, HVAC and roof are all still in fantastic shape and I don't stress about fixing or replacing any of them. I won't worry about replacing any of these items until I get past 10 years: then I'll plan to replace both the water heater and the HVAC. (And, I already know what I'm going to replace them with.)

You don't say if you have a management company working for you on the condo or not, so I'll assume you don't. However, you should not need to stress over the potential risk of major appliance failure: you can have the HVAC checked every year for 100-or-so bucks and you (or your management company) should be draining the water heater at least once a year - I personally drain mine every six months - it keeps hot water quality very high in the house and avoids the classic "rust hole in the bottom of the tank" problem. (I'll bet you I can get 15 years out of this water heater with normal anode replacement.)

Also, I recently preventively-replaced the electric elements in my water heater, resulting in a savings on my electric bill and much-improved water heater performance. The top element showed it had an internal short and the bottom element was completely covered in scale, limiting it's effectiveness.

And BTW: it's time to have the anode checked in the water heater. If you've not paid to have that done, call your plumber, schedule time with your tenant and have that done, ASAP.What I would suggest is that you have these checks on both the water heater and HVAC done, now, to both gather information on their condition AND to ensure you don't raise the rent then have an equipment failure, pissing off your (excellent) tenant. If I'm a tenant, I'm glad to pay a reasonable rate increase if everything in the condo is in nice condition and I've seen the landlord do proper maintenance on it - those are headaches tenants expect to avoid for their money.

4) You don't say if you are paying the utilities as part of the rent and I'm assuming you are not. If you are, there are ways to manage those costs, but I'll not go into that - if you aren't, then it doesn't matter for this discussion.

You are right to worry about systems failure, but you can manage that risk AND use the management of that risk (paying to do the maintenance) as a great reason to raise the rent "only" $50/month. You'll have to pay the cost of the work, but better to pay that cost on your timetable instead of getting a call from an angry tenant at Thanksgiving, Christmas or a family get-together saying the water heater failed.

[foggnm]

If you keep it, raising the rent (assuming you're renting it currently below market) is absolutely necessary...because you're losing money every month. Or maybe you're not losing money over the year, depending on what tax advantages you have from this property? Either way, I say in general that having a rental property where your expenses exceed the rent is not a desirable situation. I'd also look at what the average market increase is likely to be over the next 5 years. If say, your place is going to appreciate by 3% annually, would that make it worth it to hold on to for 5 years? The thing that most concerns me is you say currently the place is worth about $325 and you bought it for $350. No even including the realtor fees you'd encounter during a sale, you're already at a 9% loss. What if the price goes up to $375 in 5 years, well after you sell it and take the 8% fees for selling out, you'd end up with $345k. That's still a loss. That doesn't even include your monthly loss or the fact that you haven't been living in the place or enjoying it. If you can't make up your mind, in the short term at least try to raise your rent to cover the costs. It may not be the best investment you've ever made, but at least then you won't be paying out every month to have someone live in your place.