Should I sell or rent my condo?

7 Replies

I bought a condo in Jan of 2013 for about 250k and now similar units in my building are now selling for around 300k.

I have another house that I'm fixing up and should be done with in a few months. I'm wondering if I should rent out my condo to make some extra money or just sell it for the little bit of profit and not have to worry about managing rental in a condo where the HOA could restrict them if they wanted and the HOA dues just went up from 352 to 384 on my unit. The real estate lady thought I could collect about 1400 for rent on this 1 bdrm condo.

I get this question all the time, and my answer is always "dump it." 

The typical scenario is someone who bought the condo a couple of years ago and has very little equity.

The CMA estimates they can get $1700 a month for rent. But their PITI is $1100. Their HOA fee is $400. And the property management fee will be $170. So the monthly nut is $1670 and that's not counting maintenance costs.

They usually want to hold on to the condo because they think it will magically double in value in the next few years. But condos generally do not appreciate at the same rate as SFRs.

So in your case, the answer is simple. What is your monthly nut compared to the estimated $1400 you'll receive in rental income? If your expenses are low enough that you'll be able to generate some cash flow (I'm guessing the answer is no), then hang on to it as a rental. If not, then get out from under it.

Good luck!

Renting a house is a great solution to earn extra money. We rented our granny flat and are earning extra spending money on such a small layout which we build from granny flat builders.

Originally posted by @Account Closed :

I bought a condo in Jan of 2013 for about 250k and now similar units in my building are now selling for around 300k.

I have another house that I'm fixing up and should be done with in a few months. I'm wondering if I should rent out my condo to make some extra money or just sell it for the little bit of profit and not have to worry about managing rental in a condo where the HOA could restrict them if they wanted and the HOA dues just went up from 352 to 384 on my unit. The real estate lady thought I could collect about 1400 for rent on this 1 bdrm condo.

It looks like selling your condo and taking the profit would likely be the better move. You just had a 10% increase in your HOA dues. That 1400 is 1283 net of commissions(1 month). If you can count a 5% vacancy - you aren't much about 1200/month - and that is assuming you can get 1400 in gross rent. If your actual rent is lower, you really could be close to cash flow neutral. If looks like selling should net you a nice gain and even better it will be tax-free assuming the condo has been your primary residence.

All that being said, if you may want to move back into the condo, renting could be the best option in the short-term.

From a purely numbers standpoint, selling the condo may be the best option, but since we are talking commissions, should also mention if you sell you will likely pay 5% to the realtors (15K) plus may need to offer another 5K or so closing cost assistance to a potential buyer.

If your condo is in a good location that will attract good tenants renting can be an option. It depends on your situation and how much self-managing you are willing to do. Despite a likely tight margin, you still have someone else paying your mortgage.

Be honest with yourself about how much you will need to do in repairs (both now and in the near future) and that will help determine your numbers.

Good luck.

Since you've lived in it for 2 out of the previous 5 year period your profit would all be tax free. So that is a consideration.

Beware renting and then moving back in as there are restrictions and some depreciation recapture issues to deal with that could reduce the amount of gain that would then be tax free.

Looks like you're in a great position to take this sale tax free and then move right into that next house and live there for 2 years before selling and once again taking the first $250k/$500K in gain tax free.

And what if you banked the profit from the sale of the condo and in a year or so added to it and bought another house to fix and move into?  Not a bad business plan at all.

In your case i would sell the condo it doesn't seem to financially be beneficial to keep it at this time. 

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