Should I sell my Condo in Irvine, CA?

[TPLFIRE]

Greetings fellow MMMers!

I'd like some facepunching if needed!

Income: $95000

Current expenses on the Condo:
Mortgage: $1600/month - 14 years left
Property tax: $6750/ year
HOA: $310/month
Agent fee: 5% of rent = $125

Monthly I'm paying $2597, excluding fixes and the rent is $2500.

I've been renting this condo out for the past year.  I've paid $3100 on laminated flooring, $810 water heater repair, and about $600 in cleaning and fixes.  Recently I discovered mold due to a furnace leak and it may take a few more thousand to fix.  My tenant left January 2014, and I need to fix this mold issue before I can rent it out to the next tenant.

I bought this condo in 2008, much earlier than I read MMM (I started reading a year ago).  And by now, I know the high property tax and HOA is just a bad investment.  But this area is very great and I was hoping I can move back some day after my early retirement with my future wife and kid. (I'm 35 and single). And I hope to retire within the next 5-10 years. If it's 10 years I'm just being very safe.

But after all the troubles I've been through, I'm beginning to think I should take the jcollin's route - REIT instead of buying and maintaining an actual house. The agent is a friend and is capable of her job but is still a hassle to deal with when it comes to fixes and tenants. She mainly want it done at a high price (which according to her, is more quality) and get it over with all the time, while I'm fighting to find my own good pricing.  This kind of defeats the purpose of hiring an agent when I'm shopping and researching on fixes and such for every single case. I am somewhat handy and I did a lot of fixes on my own when I'm around, but since I travel 50%, I had to hire the agent to help out.  I'm hoping I can get some great MMM style suggestions on this. 

I'm following the Asset Allocator's distribution right now on my other investments.  25% in 4 vanguard stocks.  My next question would be where to put the money if I was to sell my condo?  Do I simply just put them in the Vanguard REIT?   How should I allocate my assets at this point?


If I sold the place, I would be renting until the next housing disaster (sorry). And buy a quality place around my family in socal.

Please let me know if I should add any more info.  I'd be glad to share it.  Thank you!

[nicknageli]

Sorry.  I don't have any recommendation on what you should do with your condo, but I'm giving you a bump for others to respond. 

I love Irvine and wish I could afford to live there.  As a comparison, my property tax last year was $1,158 on a freestanding house with 4 beds and 3 baths.

Gotta love Newport Beach nearby.  Huntington Beach.  Fashion Island.  Irvine Spectrum.  Would be nice!

[GregO]

You can post this over in the Real Estate section if you want more comments.  But I think it's pretty clear that if you have a negative cash flow (losing money every month) BEFORE including maintenance, then you need to sell ASAP.

As for the REIT, that is very different from owning real estate.  It's not a bad idea to own real estate at all, you just have to be much more careful about what you buy.  If you want to invest in it, you need to learn a lot about how to judge if the property will have positive cash flow before you buy it.

And lastly you should look at the tax implications if you sell your condo, both the tax deductions you will be losing and the capital gains or losses you are taking on the house.  You didn't tell us if it's up or down in value but if you bought in '08 in California, it's probably down.  But you should check anyway.

[sunnyca]

If I sold the place, I would be renting until the next housing disaster (sorry). And buy a quality place around my family in socal.

I'm a little confused by this last part.  Are you living there now when you're not traveling?  If you sell and then rent, are you planning on renting in Irvine? 

If you want to live in Irvine long-term and really like the condo, I'd maybe consider keeping it.  Only because Irvine's housing market is kind of... anomalous, as I'm sure you know.  It seems to me like most of the properties listed in Irvine are priced *really* high, and have crazy mello-roos to boot.  I have friends that have bought recently in Irvine that pay over $5k in mello-roos alone.

Rent in Irvine is insane.  I have a condo in Tustin Ranch, and I'm always amazed by the prices people pay to rent in this area.

[TPLFIRE]

Agreed on the pricing of Irvine condo/houses.  It's going up pretty quickly right now.

I live at a friend's house, sharing a room for $600 a month at Alhambra, where it's closer to work.  I really love Irvine as well.  But like you mentioned the mello-roo is making it less sexy to own. (I've added it to my property tax).

The price did go up since 2008 (replying to an earlier comment). But if I added the HOA, Property Tax and Mello-Roos, the increase is not that big of a deal. (about 10k)  I guess I can let the house hold its value while I cash in the rent but I will need to deal with potential bad tenants...

[FuckRx]

95k income and living in a 600/mo place, that deserves a pat on the back. much respect. i owned a place in del mar (san diego) and rent would have been right around the cost of my mortgage, similar to your situation, i decided to sell than deal with the headache of renting etc. i went to irvine for undergrad but don't know if that's my kind of town to date in. i'm 35 and single as well. best of luck either way.

[sunnyca]

As a 32yo single, I would agree that Orange County in general isn't great for dating. But I got the impression that he was planning to find someone first, then move back to Irvine to raise a family, which a lot of people seem to do.

Dealing with bad tenants can be rough, but there is a high demand for rentals in Irvine.  I've seen people pay $2k+ for a one-bedroom apartment in certain parts of Irvine.  It all depends on what you would like to do.  As I mentioned earlier, housing prices rise quickly in Irvine.  I know the realtor you're using is a friend, but maybe you can try finding a different agent that would be more amenable to looking for good deals on repairs?

Good luck!