Another rent-or-sell scenario

[barb]

We bought this condo 3.5 years ago in a HCOL area.  Just finished fixing up a few things and getting it ready to rent.  We close on a new property in mid-September; looking for a renter to move in October 1.

Market Value: 160,000
Original Purchase price: 150,000
Original Mortgage Amount: 120,000
Interest Rate: 3.875
Mortgage Term: 30yr
Term remaining: 26.5
Amount remaining on mortgage: 109,856.93
Deferred maintenance notes: Furnace is 17 years old -- have been saving since moving in for a replacement; have $700 set aside for this currently.
Anything else special or unique in regards to the numbers of the property:  Had two special assessments already this year totaling $2,427‬.  Located in an area I fully believe will gentrify/appreciate in the next 5 years.  We replaced the washer/dryer at the beginning of 2019 ($2,250).

Monthly outflows:
P&I: 564.28
Taxes/Ins: 275.82
HOA: 268
CapEx: 25 (300/yr)
Repairs: 16.67 (200/yr)
= ~1,134

Projected monthly inflow: 1,500
Cash flow: 366

I'm able to afford this condo's outflows plus my new property without adjusting my other savings rates/spending -- I've heard the horror stories in this tenant-friendly city of tenants who don't pay and can't be evicted for a year so this was a crucial data point for me as a new landlord.  We're moving a few blocks away so plan to self-manage.  I've sort of overestimated this rental market right now.  I've had ~12 showings, 6 of which were good options, but zero people have actually put in an application.  The number of respondents I'm getting makes me think the price is okay but I still lowered it to 1,450.  We're thinking of dropping it to 1,400 to be 100% sure that we'll have someone in by October 1, but this starts to get close enough to "break even" per month that it worries me.

At $1,400 per month as the first year's rent, does that push this to "bad deal" territory?  Was it to begin with?

[Papa bear]

The HOA fees are pretty killer on this one. Not going to break the bank, but you really aren’t making much.  It will probably end up being a tax loss every year - can this help offset some of your income?


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[Another Reader]

Most people that plan to move start looking 4 to 6 weeks out.  You should be seeing your best quality prospects now and for the next week or two.  Generally, if you are having showings but no one is filling out an application, your rent is too high.  Is there some objection to the location or condition of the unit? 

As you currently occupy the unit, some people may not be able to visualize living there or they may feel uncertain that the unit will really be available October 1.  What happens if your purchase falls through at the last minute?  Vacant units are usually much easier to rent.

I don't own condo rentals, but the attitude and behavior of the HOA towards tenants can make people hesitant to rent in a building.  Is it possible that your HOA might be difficult when dealing with tenants?

Finally, fewer people want to move in the fall and winter.  In some areas, the rental market is dead from October through the holidays. You may want to consider that as well in pricing the unit.

In your shoes, I would be inclined to sell and look at other options if I wanted to get into the rental business.

[ecchastang]

HCOL with a condo of 150k? 

Also you are assuming very low Capex and repairs, plus not accounting for vacancy or management. 

So you are breaking even, and have only experienced 10k appreciation in 3.5 yrs.  Probably better to cut your losses. 

[barb]

Thanks for the replies, all.  I'll start discussing a sale with an agent at the beginning of October if I failed to get someone in here by that point without dropping the price.