Author Topic: Reader case study: Keep condo near U.S. Capitol or sell it?  (Read 1093 times)

Hike

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Reader case study: Keep condo near U.S. Capitol or sell it?
« on: September 14, 2016, 10:13:39 PM »
I'm trying to decide whether to keep renting or sell this 2BR, 1BA condo in DC, 3 blocks from the U.S. Capitol. Looking for some wisdom from those who have more experience. Thanks!

Market Value: $530,000
Original Purchase price: $440,000 in 2010
Original Mortgage Amount: $390,000
Interest Rate: 3.375
Mortgage Term: 25 (refi in 2012 for lower rate and shorter term)
Term remaining: 22
Amount remaining on mortgage: $338,000
Gross Rents: $2,725 monthly as of March. Had been renting for $3,000 monthly for 3 years before that, but market is more competitive and tenants left in the winter, a slower time for rentals in DC. Current lease until July 2017, so hope to raise rent by $100-$200 per month then.
Principal and Interest (the P&I of your PITI - should match with the above info): $1,867
Taxes and Insurance (the T&I of your PITI): $333
HOA costs: $150
Property Management fee: $218
Deferred maintenance notes: we are about to refurbish the chimney shared by the four units, so my cost will be $5k. Will probably need to spend another $5-7k in the next 5 years for my share of roof refurbishment.

Life Situation: IRS filing status is MFJ, we live in WA (no state income tax). 25% federal income tax bracket. Rental income reported on Schedule C, although depreciation, interest and other fees typically make the reported income negligible.
« Last Edit: September 15, 2016, 07:54:52 PM by Hike »

marty998

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Re: Reader case study: Keep condo near U.S. Capitol or sell it?
« Reply #1 on: September 15, 2016, 01:41:36 AM »
I'd happily take those numbers, but different market so not totally qualified to answer.

Unless they are going to move the Capitol building I think you're onto a winner. There'll always be a pool of political staffers and lobbyists who need a place to stay nearby for 1-2 years at a time.

And I'll bet they ain't making anymore land nearby to build more units closer so you won't be devalued in future.

BlueHouse

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Re: Reader case study: Keep condo near U.S. Capitol or sell it?
« Reply #2 on: September 15, 2016, 05:11:20 AM »
I live a few blocks from your condo. It is exponentially more difficult (and more expensive) to get something closer than yours, so I would be hesitant to give it up. But you haven't shared the details of the condo BR/Ba?  And you haven't shared the effect on your life.
If this causes you stress on a regular basis, worry about this or that, then I would be quicker to dump it. If your main interaction is with the management company and everything can be fixed with money, then I'd put more weight into keeping it. If you can change your lease to coincide with inauguration, you can Airbnb it door a few weeks and probably make more than you could for 6 months! 
If you care to share your cross street, I'll have more insight into upcoming projects that may affect future sales or rentals.

Ensign1999

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Re: Reader case study: Keep condo near U.S. Capitol or sell it?
« Reply #3 on: September 15, 2016, 06:42:33 AM »
I haven't run the numbers, but sounds like if you sold right now you would walk away with about $150,000 after closing and taxes.  You need to weigh what this money would make you in another investment vs what the ROI is with the rental.  You can also take into account that you are gaining equity each month and if you have positive cash flow then it might be worth the risk and trouble of keeping the place.

SwordGuy

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Re: Reader case study: Keep condo near U.S. Capitol or sell it?
« Reply #4 on: September 15, 2016, 11:04:45 AM »
You have negative cash flow.

That's generally a bad sign.

You might make money on the appreciation or the equity build up when you sell, but until then, you will be losing money.


Hike

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Re: Reader case study: Keep condo near U.S. Capitol or sell it?
« Reply #5 on: September 15, 2016, 08:00:05 PM »
Thanks everyone for your input. I added above that it's a 2BR, 1BA. It had been cash flow positive until this year, before we had to drop the rent and the chimney issue came up. So we were able to save some for a maintenance reserve.

I love the inauguration idea, but all the owners agreed we wouldn't do rentals less than 6 months. 2 of the four owners still live there. (Plus, if Trump wins I don't think I want deal with any of his supporters celebrating...)