Should I sell my condo?

Question

BiggerPockets community,

I come to you today looking for some advice.  I am a small level landlord (I own a duplex with both sides rented out and a condo which I live in and also rent out my guest bedroom).

I am looking to house hack but unfortunately I believe my condo may be holding me back from my goals because my HOA does not allow the units to be rented out.

I have lived in this condo for 2 years and in that time it has appreciated by about $30,000 so I can sell it and make a positive profit (but will need to pay $12,000 in realtor commissions.

Does anyone see an option other option if I want to continue buying properties?  In hindsight I believe buying this condo may have been a bad idea because I was not aware of this stipulation beforehand.

In an ideal world I would like to keep the condo but I don't believe that is a possibility.

Thanks for all your help!

All the best,

Ryan Brown

Will Barnard · Answer

Tough to say without more specific financials, however, condos (which have associated HOA's, have dues and costs which eat into cash flow, they have rules which hinder your ability to do certain things (as you have found out) and worst possible problem could be a need for the HOA to issue a special assessment to pay for some major capital expense or lawsuit. I personally do not recommend holding condo's or any HOA properties (other than a SFR) as these risks can not be mitigated by you. So with just that, and generally speaking, I would personally sell and put the money into a better investment for long term where you can mitigate some risks and make up your own rules, not be governed by an HOA or management company.

Your other HUGE benefit to selling is the fact that you have lived there for the last 2 years which means you qualify for a capital gains tax exemption of $250k ($500k if filing jointly with wife) and would not have to go through the difficult process of a 1031 to avoid taxation on your gain. Your entire gain can be used tax free to roll into another investment.

I am not a CPA or attorney and the above is not to be construed as legal or tax advice, just my personal experience and suggestion. Please consult with your CPA to confirm this.

Antoine Martel · Answer

Hi Ryan,

I think an argument could be made for keeping and selling.

If you desire to keep the condo, you can keep investing in RE by raising money from investors and using your current portfolio to show the work you've done. You can take a percentage of the equity and cashflow for the work you do with putting little to no capital in.

If you want to sell it, I think you'd need to see how far your capital could go in investment properties. The cashflow could cover your living expense & rent. Then you could potentially live for free!

Good luck in your decision!