Hello everyone, I’m in a bit of a bind and would like your thoughts on my financial situation.
I graduated college in 2007, lived reasonably below my means, packed away about $35,000, and purchased a 1 bed, 1 bath condo in a coastal city in Orange County in the winter of 2008. Purchased for nearly $250,000 with a 10% down payment and a 30 year fixed mortgage at 6.0%.
Mortgage, PMI, HOA dues, and property taxes result in a monthly expense of $1,900. In retrospect, not the best decision as rent for apartments on the same street with similar (arguably better) amenities were going for $1,200 at the time. But I was foolishly emotionally wrapped up in the idea of becoming a home owner.
It was a fixer and I spent $12,000 in savings from my job over the years, doing what work I could myself to save a bit.
Due to a job relocation, my commute increased substantially and after doing that for a while, reached a breaking point and rented out the condo, while renting a place closer to work. Condo is currently bringing in $1,300 a month. Rents for similar condos in the area going for ~$1,250 - $1,350. I’m currently paying $1,450 to live closer to work.
I’m obviously no personal finance whiz, but I’ve made it a priority to educate myself more over this last year. Got to admit, been kicking myself lately for that naïve purchase in 2008 now that I know more. When all is said and done, the condo is costing me $600/month out of pocket, and I get about $300/month back via the refund from tax deductions each year. Total cash dumped into the condo, excluding mortgage payments, and included accumulated $300 monthly rental losses is about $48,000. I owe $206,000 on the mortgage.
At the height of the bubble, similar units were selling for $330,000. After the crash, several foreclosures/short sales were going for anywhere between $80,000 and $160,000. Prices seem to have recovered somewhat now, and a similar unit sold for ~$225,000 last month.
I have no desire to keep this condo long term for a number of reasons. Primarily because it will take many many years to potentially become a profitable rental (not to mention make up for accrued losses thus far…), and I’ll likely have a growing family in a few years. I’ve been lucky with my tenants so far, but I know myself well enough now to say being a landlord long term is not for me.
What do you think are my options at this point? I could try and sell it in the near term, hopefully getting $225k, taking care of the mortgage debt and losing $35-40k overall. Or wait it out for a bit to see if the market keeps improving?
The idea of a second housing bubble in Southern California makes me really uneasy as there’s no way to predict what will happen with any certainty. Prices may collapse even lower in the future.
Perhaps the answer is obvious, and maybe I’m too wrapped up in this emotionally still. These last 5 years have been one hell of a time.