Author Topic: To Sell or to Keep Renting NYC Apt.  (Read 1145 times)

Dalila

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To Sell or to Keep Renting NYC Apt.
« on: August 01, 2016, 10:50:03 AM »
Hello,

This is my first post on an online forum.  I have to make a decision fast and am hoping for the wise advice. I fell into landlording when I started renting out my then primary residence after a move in 2014.  The real estate in question is a NYC coop which I had since 2010 and lived in until 2014. I was told by a real estate broker (confirmed by an accountant) there is three-year window to sell the apt. without paying taxes on appreciation. The apt. became suddenly vacant and now I am presented with a choice to either sell or find new tenants.  The three-year window expires in March 2017.  Here is the financial picture for the apt.:

Purchased in November  2010 for $208K, put 20% down, current mortgage balance is $150K at 4.375%.  Spent $50K (foolishly) on renovations, bringing my out of pocket cost to $91,600. I lived there until February 2014 and started renting the apt. from March 2014, .

Monthly expenses:

     mortgage:              $832
    maintenance:         $490
    sp. assess.             $150
    sublease fee           $41 (assessed annually as $490)
    insurance                $21

Total monthly expense $1,534. Rent has been $1,750, so positive cash flow is $216 a month (about 2% return on almost $92K initial investment).  As mentioned, the apt. is now vacant and probably will be for a few weeks, depending on whether I decide to sell or rent again.  I am most likely losing out on August rent. Projected new rent is $1900-2000.

Comps in the building and in the area have been $300K-$350K and according to my broker, I can expect to sell for a price in this range. I don't know if I am including enough information for a complete analysis, but please let me know if there are other factors in play.

Please help and thank you very much.

sis

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Re: To Sell or to Keep Renting NYC Apt.
« Reply #1 on: August 01, 2016, 03:26:41 PM »
How is your co-op board?  Will it be a pain to sell and get an approved seller?  Which area of the city is it in?  Keep in mind with the L train shutdown in 2019 it might be possible that either your property value will go up a lot as people are displaced and/or you will be able to get more for rent as the hipsters flee willyb for greener pastures.

Is there any possibility that you would move back there in the future and make it your primary residence again?


Dalila

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Re: To Sell or to Keep Renting NYC Apt.
« Reply #2 on: August 02, 2016, 08:17:46 AM »
Thank you for your reply. The board is relatively easy. I am in central Queens, not affected by the L train. I really like your idea of displaced hipsters, I had not thought of that.  Come to think of it, we have had a lot of transplants from Brooklyn pushing the prices up. The apt. itself is not great - I would not want to live there again. I am inclined to sell, especially since checking the comps last night, similar apts now fetch up to $400K.  But as you said, it can go much higher. My other problem, or rather a concern, is what to do with the money after the sale. If investing in real estate and stay in NYC (the only market I know), all I will be able to afford is another coop.  But very few are well-maintained (I have extremely low maintenance of under $500) and are not investor-friendly. Because of this my thinking turns into "I already have a coop, why should I sell it. Because I want to avoid paying tax on the gain. But then I won't find another apt. to invest in."

Dalila

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Re: To Sell or to Keep Renting NYC Apt.
« Reply #3 on: August 02, 2016, 08:27:14 AM »
EDA: another thing to consider is that I cannot tap equity in the apt. Because of the peculiarity of the board, banks give mortgages, but not homes equity lines in this building. So the only way to get money of out this apt. is to sell it.

south of 61

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Re: To Sell or to Keep Renting NYC Apt.
« Reply #4 on: August 02, 2016, 02:23:39 PM »
Are you likely to move back to NYC? That would be a major factor for me. I moved from a HCOL to a lower COL and I held onto my property in HCOL city until I was sure that I wouldn't be going back.
I was afraid that I would not be able to afford to buy back into HCOL, but once I knew I wasn't going back I found it much easier to decide to sell.

sis

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Re: To Sell or to Keep Renting NYC Apt.
« Reply #5 on: August 02, 2016, 02:39:52 PM »
EDA: another thing to consider is that I cannot tap equity in the apt. Because of the peculiarity of the board, banks give mortgages, but not homes equity lines in this building. So the only way to get money of out this apt. is to sell it.

Do you need that money available?

No one can predict the market (of course), but real estate in NYC has historically gone up.  I think that you need to make a spreadsheet and figure out just how much more you apartment would need to sell for to offset the loss of the ability not to pay capital gains.  Then think about the effect of the L train being shut down for 18 months.  Will you be able to get much higher rents/and or sell at a higher price during that time?  (enough to offset the loss of capital gains)?

How are the finances of the board?  I see that you have a special assessment, is this likely going to be an ongoing problem?  I know that there are some places that are in terrible state financially (looking at you Acropolis in Astoria) and selling is a pain because you essentially wind up needing a cash buyer.

Edited to add:  Right now you seem to be only counting your positive cash flow from the rental as ROI.  You also need to account for the fact that you are some distance along in your mortgage, so each month the principal you pay towards that mortgage is also a return.  Granted, it is all tied up, but your mortgage payment is also going towards building equity.  It looks like at this point in your mortgage about $290 of your monthly payment is going towards paying off the principal.

« Last Edit: August 02, 2016, 02:49:30 PM by sis »