Author Topic: Sell or don't sell my money-losing condo?  (Read 685 times)

BlueHouse

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Sell or don't sell my money-losing condo?
« on: April 03, 2019, 01:56:24 PM »
Please help me decide whether to sell or not to sell my condo.    I didn't sell it when I bought my new oversized mansion in a HCOL area, because the market had tanked so much and I was sure it would come back up shortly.  It did, but I had a tenant in there that seemed to be great and even though I was losing money every month, I didn't want to disrupt his life (see how bad I am at this?) and now it's down again.


Here are the facts:

Condo location: Reston Town Center, Virginia

Purchase price:  $354K in 2005

Current estimated value:  $270K-$295K (depends on how much reno I do before listing it)

Ownership cost:  PITI $1742/month + HOA $361/month = $2,103/month

Rental price (if I rent it again):  $1650-$1700/month
Monthly Cash Flow:    -$451/month!!

Other factors:  Reston Town Center is on the Silver Line, which was expected to be completed by 2016.  Now we're hoping for sometime in 2020. This is not guaranteed.

If I sell now, I am locking in my loss of at least $95K (including real estate fees) and a further loss of over $20K (from past monthly cash flow negatives) and maybe $17K in maintenance fees.  Total expected loss by selling NOW:  $132K

If I hold on for two more years and keep it rented for those two years, I'll add at least another $13K in losses, but I cannot imagine that the sales price could decrease any more than it already has.  And I'm hoping with the metro + Amazon effect, that housing prices might increase a lot.  At this point, I'm just hoping to break even! 

Affordability:  I could afford to pay off the mortgage today if I wanted (but I wouldn't).

Further info from accountant:

At the end of 2018 you have accumulated 84k in depreciation, that takes your cost down to 276k, so if you sold it now for 295k you would have a gain.  Because we have to recapture the depreciation that would all be taxed at 25% for Fed.  Each year your depreciation is 12,446, which lowers your cost basis.

Now at the same time you have accumulated 72k of passive loss carryovers.  This will net against your gain and would exceed it, so in the example above, you wouldn’t pay any tax on the gain, you would actually have a 50k loss that would go against your ordinary income which in your case is worth $17,500 in real cash (from tax return).

I am leaning heavily in one direction and I don't know why.  I don't think that what I WANT to do is the best decision financially and I can't figure out why I'm dragging my heels on making a decision.  Now I'm just losing more money because it's not listed on either the sales database or the rental database. 

Please, knock some sense into me and give me advice that I will listen to!!

YttriumNitrate

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Re: Sell or don't sell my money-losing condo?
« Reply #1 on: April 03, 2019, 06:06:30 PM »
This is one of those cases where you must ignore sunk costs, even though emotions are screaming that they should be considered.

If you didn't own this property, would you buy this property now in hopes of getting some sort of gain off the Silver Line / Amazon thing? If the answer is no, then selling is the right choice.

For what it's worth, I grew up in Arlington and just last year my parents sold their house right before the Amazon thing was announced. Even with the benefit of hindsight, selling was the right thing to do.

theoverlook

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Re: Sell or don't sell my money-losing condo?
« Reply #2 on: April 04, 2019, 08:20:38 AM »
If you didn't own this property, would you buy this property now in hopes of getting some sort of gain off the Silver Line / Amazon thing? If the answer is no, then selling is the right choice.
This is my opinion as well. The current monthly loss is astronomical and will make any future sale price increase pale in comparison. Even rented it's losing so much I can't see any future price gain offsetting it. At $451 a month loss PLUS maintenance PLUS vacancy you've got a hard headwind fighting you on ever gaining anything here. SELL SELL SELL

Tuskalusa

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Re: Sell or don't sell my money-losing condo?
« Reply #3 on: April 04, 2019, 08:32:31 AM »
You mention your oversized house in a HCOL area. Are you happy there? 

The only reason to keep this condo is if you moved back in. Otherwise, sell and avoid the future losses.

AlotToLearn

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Re: Sell or don't sell my money-losing condo?
« Reply #4 on: April 05, 2019, 07:37:43 AM »
Sell and sell now. You will thank yourself later.

BlueHouse

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Re: Sell or don't sell my money-losing condo?
« Reply #5 on: April 05, 2019, 10:23:11 AM »
I appreciate the comments.  It is starting to sink in.