Hi all,
I'm facing an interesting dilemma and thought I would ask all you knowledgeable real estate investors what you would do in my situation.
Background
We purchased a 1-bedroom condo for $240K (~$250K if you include closing costs) about five years ago in a HCOL city. The condo is located in a high demand area of town, literally right on top of a subway station. We are currently renting out the condo for $1500 per month, which is more than enough to cover mortgage, condo fees, and taxes. Mortgage is at 2.85%. Recent comparables suggest that the condo is currently worth ~$400K.
We have almost paid off the mortgage (only $20K remaining on the mortgage, and we're paying the minimum amount because 2.85% is a very good mortgage rate). We do not qualify for a line of credit because we are non-residents, and so we cannot borrow against the property.
The Dilemma
Our renter recently asked us if we were interested in selling to them. I'm intrigued with the idea of locking in the gains, but don't know what I would do with the money.
A new build, 1-bedroom condo in a similar area of town would currently cost approx. $350K and may not be move-in ready until 2018/2019. The real estate market has been softening over the past several months. While property values haven't gone down, they also haven't gone up quite as quickly. Also, the government recently introduced more stringent stress-testing for mortgages. Given our income levels, we shouldn't have any trouble qualifying for a small mortgage, but this stress-testing may impact other potential buyers, further softening the market next year.
I've been toying with the following ideas:
1) Keep the status quo. Keep the condo. Slowly save up the rent once the mortgage is paid off, and save up for a downpayment on another 1-bedroom condo.
2) Sell the condo for ~$400K. Split the proceeds and use as downpayments for two 1-bedroom condos. Non-resident taxes for two condos would be a nightmare for our tax accountant, unless we create a holding company and have the business purchase the condos.
3) Sell the condo for ~$400K. Dump the money into index ETFs in our taxable account. The tax situation would be a lot simpler.
Is there another option I haven't thought of? What would you do in my situation? What factors would you consider when making a decision?
Thanks!