Author Topic: Rent it out or make it a condo  (Read 1561 times)

oceanbreeze

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Rent it out or make it a condo
« on: March 08, 2014, 08:22:49 PM »
We own a 2 family house. We live in one unit and rent out the smaller unit for 1400.00 month--tenant pays utilities. Many in our area have turned their 2-3 family homes into condos. So my question is would it be better to turn the house into 2 condos and sell the tenant condo? We could probably get around 225k and invest the cash,  or should we continue renting renting iy out for the 1400.00?
A little background--we are older by MMM standards--late 50s and hope to retire in 4-5 years.
Thanks for any thoughts...analysis. I'm not sure how to analyze the 2 scenarios.

warfreak2

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Re: Rent it out or make it a condo
« Reply #1 on: March 09, 2014, 04:23:23 AM »
$225k at a 4% safe withdrawal rate gives you about $9000 per year. $1400 * 12 = $16,800 per year. Unless vacancies, maintenance &c. cost you $7,800 a year it seems like you'd rather keep renting it out.

arebelspy

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Re: Rent it out or make it a condo
« Reply #2 on: March 09, 2014, 04:20:51 PM »
I'll have more questions and some thoughts, but first: will you net 225k after going through the hassle/expense of getting it reclassified as a condo and selling it along with all the associated costs, commissions, and closing fees, paying any taxes, etc. etc.?  Or is 225k what you think it would sell for, and you have to subtract all those expenses off of that?
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Cassie

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Re: Rent it out or make it a condo
« Reply #3 on: March 09, 2014, 06:01:07 PM »
As a rental if you get bad renters you can throw them out. If you have bad condo owners (noisy, etc) you are stuck with them.

oceanbreeze

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Re: Rent it out or make it a condo
« Reply #4 on: March 09, 2014, 07:03:55 PM »
I conservatively estimate that we can sell it for 225k. Then, there are the costs associated with reclassifying the apt. Cassie, you're right that at least with a rental, we can throw out any undesirables. We've never had any dead beats, and more than 90% of our tenants have been great. Financially, would it be better to keep it a rental?