Planning to sell my condo. Right decision ?

Question

Here's my math -https://imgur.com/Tszgg4TWhy I should sell. ?

• I am getting only 1.5% returns without taking into account the equity building portion.Mortgage tax write off is 0 as I currently pay mortgage on my primary residence.I have used this property as my primary home for 2 years in last 5 years. So I will not have to pay the capital gains tax if I sell if now (CA).Average stock market return is 7-8% (historical data).Too much investments concentrated on real estate. I am paying 6% rate for my primary residence.

Why I should hold ?

• 3% interest rate and non-negative cash flow.Highly rentable area (bay area) and white collar rentals. Chances of a bad tenant is less (but possible).Bay area is a tough market to get back into.

Am I overlooking anything here ? What do you people think about my decision in selling this one ?

Joe Homs · Answer

@Karthik Jayaraman I vote to keep it. If you are NOT in a negative cash flow situation I would definitely keep it for the rest of your life. Let your tenants pay off the mortgage for you. Why are you not wring off the interest payments?

Good Investing...

Jeet Sangha · Answer

@Karthik Jayaraman Based on your math, it looks like you're losing $915 each month, which can be a significant amount for many. How much has the property appreciated since you bought it? What do you plan to do with the proceeds from the sale if you were to sell?

I understand that in the long run, the property may appreciate more, but are you comfortable paying $915 out of pocket each month? As much as I would like for you to keep this property, it doesn't pencil out as a good rental property. Moreover, if the HOA goes up again next year, your loss is only going to get bigger.

If you can sell your home for more than what you paid for it and you're not taking a loss, I'd consider selling it if I were in your shoes. Do you know if you have conventional or FHA financing? If it is FHA, you can potentially sell your property for more. I'd be happy to walk you through it if you're curious.

Wilson Lau · Answer

Curious why you are taking out equity/appreciation from the equation? I also notice you have a $570/month HOA, is it a condo and HOA keeps going up each year? Here is just my 2 cents - I think equity and appreciation are what makes you wealthy in the long run, especially being in San Jose. In general, if you have a property that's not in negative cash flow, I would recommend keeping it. And yes, stock market, and perhaps Bitcoin in these few weeks, can give you a much higher return, but real estate is a great way to diversify.

Karthik Jayaraman · Answer

Updated the stats here - https://imgur.com/a/XYfyENf

Joe Homs · Answer

@Karthik Jayaraman  I am not a CPA, but I write off all the interest payments on all my rental properties?  Do you need the tax write off?  That is why you should keep it.  With the depreciation you can write off on your taxes alone, plus all the expenses and interest payments.  Are you using your 1040 schedule E to report the investment property income and expenses?  You should still be able to write it off there, if not form an LLC and kick off a K-1 to your 1040.

Planning to sell my condo. Right decision ?

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