Author Topic: Rent out condo or sell  (Read 2245 times)

CommonCents

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Rent out condo or sell
« on: November 08, 2013, 01:24:31 PM »
We are buying a house, and trying to decide whether we should sell our condo.  Can anyone point me to a post showing the calculations for whether it's better to do that or to sell it?  I looked around a bit but didn't seem to find it and I know there should be tons.  One hitch to our situation - we don't have a mortgage on the current condo that we can write off for taxes, but will be taking on a mortgage with the house.

ETA: Condo can be sold for $415K.  Current HOA fees $465/month.  Property tax is $2500, but increases when no longer owner-occupied (to perhaps double).  No idea on insurance for the guts w/o our property (there is master insurance for the building).  Zillow claims it can be rented for $2300.  1 bed/1 bath.
« Last Edit: November 08, 2013, 01:28:42 PM by CommonCents »

dadof4

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Re: Rent out condo or sell
« Reply #1 on: November 08, 2013, 02:01:47 PM »
So 2300 a month rent, minus 465 HOA, $400 or so in taxes, is already $1400. Factor in $100-200 in maintenance, plus about 15% for vacancy, and you're left with barely $1100 return on your 415k. You could do better with an REIT, except without the headache of finding and managing tenants, handling repairs and condo issues, and have liquidity whenever you need it.

Seems like a no brainier.

arebelspy

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Re: Rent out condo or sell
« Reply #2 on: November 08, 2013, 02:10:32 PM »
Sell.
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CommonCents

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Re: Rent out condo or sell
« Reply #3 on: November 08, 2013, 02:19:58 PM »
So 2300 a month rent, minus 465 HOA, $400 or so in taxes, is already $1400. Factor in $100-200 in maintenance, plus about 15% for vacancy, and you're left with barely $1100 return on your 415k. You could do better with an REIT, except without the headache of finding and managing tenants, handling repairs and condo issues, and have liquidity whenever you need it.

Seems like a no brainier.

Yeah, that's what we felt was the case, but then we wonder why others rent out units in the building (or heck, any where in this expensive city).  Perhaps others are bad at math or hold on for other reasons - but all of them?

Another Reader

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Re: Rent out condo or sell
« Reply #4 on: November 08, 2013, 02:23:32 PM »
The yield from cash flow is very low.    Even with some appreciation, there are probably much better real estate investments out there with the same benefits.  In your shoes, I would sell this property, based on the facts presented.

People are filled with inertia when it comes to selling real estate.  They look at the transaction costs, the tax consequences, and the potential for appreciation and convince themselves they should hold on until it goes up to a value of "x."

dadof4

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Re: Rent out condo or sell
« Reply #5 on: November 08, 2013, 04:40:40 PM »
The yield from cash flow is very low.    Even with some appreciation, there are probably much better real estate investments out there with the same benefits.  In your shoes, I would sell this property, based on the facts presented.

People are filled with inertia when it comes to selling real estate.  They look at the transaction costs, the tax consequences, and the potential for appreciation and convince themselves they should hold on until it goes up to a value of "x."
Yup. I'll add transaction hassle, emotional issues tied to a former home and your biggest asset, many are underwater or close to it and would rather bleed over time than a lot at a once, perception of real estate as a solid investment vs alternatives after selling.