Sell or rent in Jersey City? Also, I paid property tax....twice?

[Icecreamarsenal]

MMM Sell or Rent

Market Value: $460,000?  Where can I get this info?
Original Purchase price: $455,000.  $511/sf, below the average of $530 for our zip code.  Not a deal by any means.
Original Mortgage amount: $364,000, with $90,000 down.  $45,000 was a 0% loan from my father, current balance is $24,000 at mandatory $3000/month payment (condition of loan)
Interest Rate: 2.375%
Mortgage Term: 5/1 ARM
Term Remaining: Loan began 10/1/13
Amount remaining: $358,000
Gross rents: ~$2700
PI:1414.69
TI: 520.83
HOA: 335

I’d also like to note, when I was calculating PITI just now, I found something headscratching to a newbie like me.  I didn't even know what PITI was until reading the example sticky at the top of the forum; pity me.
It looks like taxes and homeowner’s insurance is included in my payment, based on my PI+TI: my morgage payment.  But since my property is tax-abated, I assumed that I wasn’t paying taxes in my payments.  I got a letter from the city 3/14 asking for a biannual tax abatement service charge, in the form of 3344 every 6 months.
That works to about 557 monthly.
Me being the oblivious, overworked consumer that I am, I dutifully paid it.  I was ignorant, and really, really stupid about $ before reading the MMM blogs.  Still am but working on it.
The tax abatement service charge should be in LIEU of taxes.  Did I doublepay??  Arghhhhh!

[arebelspy]

I'd sell.  2700 gross rent on 460k market value with a 335/mo HOA is.. less than ideal.  :)

Unless you have some reason to think there will be lots of appreciation, it's not a good rental.  This is slightly cash flow negative as is, and if and when that ARM increases it'll only get worse.  You won't net much from the sale after costs and paying off the multiple loans.  There are more productive places for that money though.

[Icecreamarsenal]

I'm leaning towards selling.  I have tack down a better estimate of price and rental.
More interestingly, and stupidly, I'll have to go the office of the tax collector after getting back from Asia next week.  That should be amazing.  I've always found my interactions with government a mix between self-immolation and a colonoscopy with no lube. Should be a blast.

[GrayGhost]

This property truly and utterly fails the 1% rule, and it's cashflow negative. Jersey is also a tenant-friendly state, and it can be tough to find good contractors and PMs in Jersey City, so managing it remotely might be a huge pain.

As arebelspy suggested, I'd sell unless you foresee significant appreciation in the area that outpaces the stock market and makes up for tying up your cash and attention.

Personally, I'd sell ASAP.

[Another Reader]

Only in New Jersey would the tax abatement fee be similar to the property tax amount somewhere else.  There should be a breakdown of the payment on the mortgage statement.  Your original paperwork from the lender should also show the estimated payment and its composition.  I had a similar problem in California.  My father transferred his base year assessed value to a new property.  The lender escrowed taxes based on their assumption of market based assessed value.  It took over two years to convince them there was not a corrected tax bill in the works.

Call a couple of agents locally to get current market value for the unit.  Make sure they give you the comparable sales.

You are going to have a problem selling.  The commission and fees in New Jersey are high.  You will probably get enough out of the property to pay back the Bank of Dad, but you won't recover most of your investment.  You can sell and consider the loss as an expensive lesson in real estate, or hold on in hopes the property appreciates sufficiently in the initial fixed interest period to bail you out.  Can't help you determine if the Jersey City condo market will appreciate. 

[Icecreamarsenal]

It's a very nice place to live. Not the best as an asset. It's 27-23, which is $400 positive. I'm sure there's a factor of breakage and management time. I know this because I've seen it in one of ars' posts. Now to dig and find what that was.


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[Another Reader]

The rent needs to be at least one percent of value.  It's an older building, so the HOA will be high because of repairs and maintenance to the structure.  The HOA fee substitutes for some of the repair and maintenance expense you would otherwise deduct from gross income  The rule of thumb is to use 50 percent of the gross income for operating expenses.  Half of $2,700 is $1,350, making you cash flow negative over time by a relatively small amount every month.  That 50 percent includes taxes and insurance, but not the P&I portion of your mortgage payment.   P&I is $1,414.69.

In your shoes, I would determine current market value and assess the direction and depth of the market.  If values are skyrocketing, why not stay where you are and re-assess your position every 6 months or so?  Yes, it's going to be a little crowded in 890 square feet with two kids, but that's the trade-off for living in metro NYC.  If the market is slowing, I would put it on the market, as long as you know what your next move will be.

[Oldguy]

Patience.
You are 8 second mortgage payments away from the point of Fire in 12.5 years with your current income and expenses.
Rent what you have? - bad
Stay where you are? - good
Sell and rent a 322, 2000 SF apartment for 2200 where you work? - better You left out 210 month parking.
Put together the sale of your place and a purchase at 25%-30% below market value with zero down where you work? - good luck!
If you are paying taxes into your mortgage escrow that is where your tax money is now. I have never been able to get money I owed to a government back from them, ymmv. I would contact the mortgage company.
btw Beautiful art.

[Icecreamarsenal]

The rent needs to be at least one percent of value.  It's an older building, so the HOA will be high because of repairs and maintenance to the structure.  The HOA fee substitutes for some of the repair and maintenance expense you would otherwise deduct from gross income  The rule of thumb is to use 50 percent of the gross income for operating expenses.  Half of $2,700 is $1,350, making you cash flow negative over time by a relatively small amount every month.  That 50 percent includes taxes and insurance, but not the P&I portion of your mortgage payment.   P&I is $1,414.69.

In your shoes, I would determine current market value and assess the direction and depth of the market.  If values are skyrocketing, why not stay where you are and re-assess your position every 6 months or so?  Yes, it's going to be a little crowded in 890 square feet with two kids, but that's the trade-off for living in metro NYC.  If the market is slowing, I would put it on the market, as long as you know what your next move will be.

It was actually built in 2007, pretty new.  The 'loft' part may have thrown you.  They build 'em this way now.  Periodic reassessment seems to be my only option. 
Thanks for the reminder on the rule of thumb for 50% of gross income for operating expenses.

Patience.
You are 8 second mortgage payments away from the point of Fire in 12.5 years with your current income and expenses.
Rent what you have? - bad
Stay where you are? - good
Sell and rent a 322, 2000 SF apartment for 2200 where you work? - better You left out 210 month parking.
Put together the sale of your place and a purchase at 25%-30% below market value with zero down where you work? - good luck!
If you are paying taxes into your mortgage escrow that is where your tax money is now. I have never been able to get money I owed to a government back from them, ymmv. I would contact the mortgage company.
btw Beautiful art.

Thanks.  I really enjoy her work, she's so talented.  It's nice to watch her paint.  She's been commissioned by Jersey City to put up 6 story murals over town.

[Another Reader]

It wasn't the loft, it was the leaky windows that were cold during the winter....

[Icecreamarsenal]

It wasn't the loft, it was the leaky windows that were cold during the winter....

Ah!  Gotcha!  From my other post.
Yeah, that's a real headscratcher.  I'm in a corner northeastern unit, which might explain most of it.  My apartment complex has online forums, it seems to be a common problem.
The fixtures, etc., are appealing, but it seems they skimped on the windows, especially the settings/frame.  During the past brutal winter, I could actually feel cold air coming from the metal case around the window, not the window itself.
My father-in-law is in construction, and I'm visiting him in Korea.  I just brought this 'cold window' problem up with him yesterday in passing; he started calling people and drawing up sketches to replace our windows.  He might make a new window/frame, within the frame?  To create a buffer between the first window and the second window.  Then he started complaining about how it was just wrong to not do that in the first place.

[Guizmo]

Ice cream, the HOA might not let you put in the windows you want. Check with them first.

[Oldguy]

Single pane windows? Leaking around the edge of the entire window? Leaking between the metal and glass in the frame? Conduction? Candle test? Photos?
It is hard to maintain both natural light and emergency egress. I appreciate your Father-in-law's frustration.
You can shop your electric rates between suppliers at NJ BPU website if you haven't already.
Glad to hear about the murals. Nice time of year to sell the Donor-cycle for working capital.

[Icecreamarsenal]

I have NOT shopped rates, or checked with my HOA. Thanks much for the suggestions, there's still so much to learn.
When I hear donor cycle, I think medical professional, old guy. I'm getting very unenlightened possession pangs when I think of selling it.


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[Oldguy]

There is perfect efficiency and there is optimal. If you have a will, have some insurance to clean up any financial mess, accept your own mortality and are aware of the stupidity of other drivers, then you are set. It's just the season to sell those things, you mentioned selling it in your other post and when those beautiful 6 story murals go up your wife is going to start getting business.

Interesting article about our friend and his motorcycle here:
http://m.yourhoustonnews.com/woodlands/news/motorcyclist-dies-in-wreck-on-texas/article_f7c3c93e-5d57-5a2d-a830-d6de198ddd18.html?mode=jqm
Some nights a John Doe in the ER isn't a John Doe.

[Icecreamarsenal]

Thanks oldguy.  I realize it'll be a haul.
I don't know Youngblood...

[Oldguy]

I guess I didn't communicate that very well. You don't want be perfectly efficient - funneled, sexless, spreadsheet guy ;) You want to be optimally efficient. A life which is not miserable while you are doing the years of saving. If keeping the motorcycle and living next to Manhattan is important to your quality of life don't change that. Throw some cheap term life and a will at it. It's fixed. It'll be a walk in the park :)

"our friend" Sorry. I was referring to my wife and I.

Anyway. I'll see you on your Journal.

[Icecreamarsenal]

Man, that line really stuck out for people. I can see why... Just wrote up the donor cycle craigslist entry, and need to take pics. Onward through the fog!


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[Liz498]

If you're looking to move, then I'd sell. If you look at where rental property ROI  is highest throughout the country [MOD EDIT: Potential Spam link removed.]. if you want to invest in a rental property in your general area, upstate New York looks like a much better bet. The maintenance issues it already has would also make me reconsider as rental unit.

[Icecreamarsenal]

Interesting. Yes I was wondering if there was a good, easy site to see if properties fit the 1% rule.
I'm just using zillow, which I'm sure is not the right tool, because even I find it severely lacking in a lot of respects.
On a good note, my wife went to the office of the tax collector yesterday and they agreed to refund the overpayment! No hassle, surprisingly. It is going to take 2 months to send the check, however.


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[arebelspy]

On a good note, my wife went to the office of the tax collector yesterday and they agreed to refund the overpayment! No hassle, surprisingly. It is going to take 2 months to send the check, however.

Awesome!  Way to follow up on that.