Author Topic: Case Study: Rent or Sell Non-conforming condo  (Read 1145 times)

Greeneyeshade

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Case Study: Rent or Sell Non-conforming condo
« on: June 05, 2016, 03:45:17 PM »
I am struggling with holding and renting or selling a non-conforming condo that was previously my primary residence. Purchased at height of market in 2005 and is now no longer eligible for a marketable FHA backed mortgage.

Market Value                      60,000    (Maybe if seller financed. investor will buy now for 40k-50k)                  
Original Purchase Price      75,900                      
Original Mortgage Amt      75,900                      
Interest Rate                               4.375%                     
Term                               30y refied to 15y (8y remaining)                     
Amount Remaining on Mort.    37,429                      
Gross Rents (annual)         7,500                      
Monthly P&I                                   500                      
Taxes (Annual)                          665                      
Insurance (per year)                      450                      
HOA (per year)                     840                      
                           
Non-conforming property due to concentration of ownership (cash buyers or heavy downpayments). Development filled with retirees (first floor) or young professionals with no money (second floor) and I am on the second floor. Wealthy association, no history of special assessments.                           
Investors ready and willing to purchase for $45k. Otherwise must hold for seller financing myself. Currently has                            
long-term tentant that require little maintenance. Original HVAC system (1998) will require replacement in the next 5-10 years                           
at a cost of 5k-10k. No other major expenses expected. Unit fully renovated prior to converting to rental.                        

I attempted to review status myself using threads here, but I have several questions. 1) should I use a seller financing market value or an investor's market value to determine ROI? Do I need to include depreciation if future costs of maintenance and reserves are included?

Rent/mo                      625    Year
Full Prop?   100%   
Months    12.00    7,500
Vacancy   10%              750
Maint   10%              750
Manag.   8%              600
Taxes                 665
Insurance         456
Reserves                 600
HOA                         840
Interest              1,772
      
Net Income       1,066.75
Equity at Risk       22,571.25
      
Return on Investment      4.73%
      
      
FMV      60,000
Mortgage      37,429
At Risk      22,571



marty998

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Re: Case Study: Rent or Sell Non-conforming condo
« Reply #1 on: June 11, 2016, 04:11:55 PM »
If you've held it for 10 years you've probably made enough cash profit to offset your expected capital losses so are in break even territory. Might be best tout your losses and move on.

How many units in the development? (These numbers are so small, property costs 10x the amount here).

If it is less than 15 units I'd be tempted to buy out all other owners, lobby the local government to change the zoning and sell the land off to developers.

Greeneyeshade

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Re: Case Study: Rent or Sell Non-conforming condo
« Reply #2 on: June 12, 2016, 03:37:33 PM »
Thanks for your thoughts. It has just been a rental for the last two years, previously it was my private residence. While the complex is large (200 units) there are three major investor/owners in the complex already each owning about 20 units each.

Is the idea of seller financing in 8+ years (when the unit is paid off) something that should even be on the table, or should I just evaluate it based on the current sales value of roughly $45k?