Author Topic: Case study to sell or rent our Condo  (Read 448 times)

Jedi_Monster

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Case study to sell or rent our Condo
« on: January 13, 2021, 05:41:14 PM »
My wife and I, and our baby currently live in a 700sqft condo in southern Maryland. It is 2 bedrooms and 1.5 bathrooms. We bought this as our first property when we got married with the intention of renting out whenever we moved. We just didn't expect to move so quick. We are expecting another baby in fall so we are searching to buy a bigger property. We currently can't decide to rent or sell the condo. I know the condos sell fast. I'm not sure how fast or easy they rent though.

Here is more information.

Market Value: $160,000 at the minimum. Other condos with carpet and outdated bathrooms have sold between 155k and 160k. I'm sure it can sell for $168,000.
Original Purchase price: $133,000 in March 2018
Original Mortgage Amount: $126,350. But I refinanced in April 2020
Refinance: $109,600
Refinance Interest Rate: 3.625%
Mortgage Term: 15 years
Term remaining: Matures in 2035
Amount remaining on mortgage: $105,802
Gross Rents: Can rent the condo for $1300, probably $1350 max due to the improvements. These condos are small so that is the going rate.
Principal and Interest (the P&I of your PITI - should match with the above info): $790
Taxes and Insurance (the T&I of your PITI): $135
HOA costs: $150
Deferred maintenance notes: The HVAC and electric water heater are the originals from when the condo was built in the 80s. They are working fine, but pretty sure they would need replacing soon if it gets rented out since renters would give it more wear and tear.

I was using the rent vs sell calculator at https://www.allpropertymanagement.com/resources/property-management/tips--tools-to-grow/rental-property-investment-calculator/ and after putting about 12% in re-investment rate, it tells me selling is better. The thing is, I'm not sure if I am using the calculator correctly.

Also if I sold, the ~50k (after any commission fees if we use an agent) profit would be tax free, and investing that for 15 years at 12% would be around $290K.

I can't predict if the condo will keep increasing in value, or how rent might increase in the area. That is why I am reaching out here to anyone more experienced that could provide feedback and recommendations.

Let me know if you need more info

Thank you

Papa bear

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Re: Case study to sell or rent our Condo
« Reply #1 on: January 13, 2021, 07:01:37 PM »
Canít speak for the area, but for me, this is a middle of the road type rental.  If you want to be a landlord, want to get a couple more places, are handy and are ok with maintenance and a side gig, then sure, keep the place, make a few bucks and learn something.

If you for any reason donít want to do any of that, sell it.  Itís not making you enough to outsource everything or to have the hassle and problems if you arenít into it. 


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Dicey

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Re: Case study to sell or rent our Condo
« Reply #2 on: January 19, 2021, 07:08:24 AM »
Another vote to just sell it and move on.

Jon Bon

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Re: Case study to sell or rent our Condo
« Reply #3 on: January 19, 2021, 11:27:03 AM »
Condos generally make poor rental properties.

90% of the time making ones former primary residence into a condo is a sub-optimal financial decision. All too often it is trying to force a square peg into a round hole.

Something else folks forget is your condo is never going to be as in good condition as it is now, 3 years of renters will depreciate it in a hurry!

Good luck. Let us know how it turns out!




ChpBstrd

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Re: Case study to sell or rent our Condo
« Reply #4 on: January 19, 2021, 01:38:39 PM »
Sell because the monthly rent ($1300) is less than 1% of the value ($168k). There is a property evaluation spreadsheet sticky thread on this board that includes a spreadsheet that will estimate your ROI if you rent. My bet is the ROI is less than 4%, so why not just buy an REIT with proceeds from the sale and skip the hassle of land lording?