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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Texas82 on November 15, 2013, 09:48:01 AM

Title: Sell or Lease?
Post by: Texas82 on November 15, 2013, 09:48:01 AM
Hello all!

I currently reside in a condo which is about an hour away from my place of employment, my family and I are looking to move closer to my work ($200/mo in fuel costs).  We're also wanting to invest into rental properties in the near future.  Details on my condo are as follows:

*Bought it as a new-build back in Oct of '09 for $122k (zero down)

*1200 sqft, 3br/2.5bth, 2 car garage, with a backyard

*$114k principal balance

*$1160.00/mo  (975.00 PITI + 185.00 HOA dues)

*5.125% rate

*30 year term

*Monthly rents in my neighborhood are running between 1250.00-1300.00 and seem to stay occupied continuously

*There's one condo directly across the street (same model as mine) for sale with an asking price of 132,000, another recently sold for 130,000

***There's currently an ongoing litigation between my HOA and the builder for faulty material/construction

*the location of my condo is within 5 miles of major employers (Dell and Samsung being two of the major ones)

With the above details, would it be best to sell or lease?

Thanks in advance!
Title: Re: Sell or Lease?
Post by: Texas82 on November 19, 2013, 09:01:23 AM
good day, any advice would be greatly appreciated.  Thanks in advance!
Title: Re: Sell or Lease?
Post by: willn on November 19, 2013, 09:23:36 AM
More details please.  How much cash do you have?  How much debt besides the mortgage?  What is the property worth?  What's your household income?

Are you going to buy or rent the new place?

I am not a fan of highly leveraged real estate so unless you are sitting on 50K that you can knock down a chunk of this mortgage I am leaning towards "sell".

Especially if you are going to buy another mortgage for your new place.

Can you refi to get the rate down? That's a pretty high rate.
Title: Re: Sell or Lease?
Post by: KingCoin on November 19, 2013, 09:27:17 AM
It looks pretty decent as a rental. Even if you strip out the HOA dues, you're earning ~$1,100/mo on a $130,000 property. Not a slam dunk, but definitely not crazy, especially for new construction in a low vacancy area.

Any chance you're able to re-fi the mortgage?

What's the worst case scenario regarding faulty material/litigation issue?

You're fairly levered, so a prolonged vacancy will leave a mark.

In short, if you're on firm financial footing, and can ride out some bumps in the road, I'd keep the property. If not, I'd sell it.
Title: Re: Sell or Lease?
Post by: Texas82 on November 20, 2013, 10:31:22 AM
household income is 110k, no debts other than mortgage.  we have 20k in cash reserves (we'd definitely have 2.5+x more than that however I inherited my wife's auto/cc debts!).  property is worth 128k

Refinancing issues:  I definitely don't have 20% in equity to avoid PMI which would counter balance a lower interest rate.  I cannot get a USDA streamline because our household income is over their income limit (we make too much for that loan, odd guideline!) 

Thanks for the responses!
Title: Re: Sell or Lease?
Post by: Johnny Aloha on November 20, 2013, 10:54:51 AM
The HOA is concerning to me ... how is the HOA financial situation? 

My brother in law got slapped with a $50k assessment from his HOA.  I doubt yours would be that high but crazier things have happened.

Will you be the property manager?  If you are paying someone 10-12%, I would probably sell it.

If you manage it yourself, and since you don't have much (if any) of your own equity into this house, I would probably hold it for the mortgage paydown and appreciation potential. 

So your return will be the sum of mortgage paydown and a little cash flow each month, although your cash flow will probably be zero over time due to minor interior maintenance and vacancy.

Personally, I am a fan of 0% down loans like yours, if you aren't paying PMI.  But they can be riskier than conventional 20% down if you aren't well capitalized or if you panic in market corrections.
Title: Re: Sell or Lease?
Post by: Texas82 on November 20, 2013, 11:35:35 AM
I'd definitely be managing it myself.  HOA currently has 30k in reserves, sitting in a CD