Inheriting condo - Keep and rent or sell and reinvest?

Question

Hi There

Brand new to all of this.

My brother and I will be inheriting a condo in Massachusetts and interested in getting thoughts on whether to keep it and rent it out or sell it and use the proceeds as seed money for potentially better cashflow investments.

I'll be splitting everything with my brother (cashflow from rental or proceeds from sale).

The condo would sell for approx $575k. There is no mortgage. It was purchased in 2015 for approx $440k so it has appreciated a fair bit.
Rents on comparable units are $2500.
Condo fee is $800/month (ouch!)
Tax is approx $5500/year.
It does not need any major upgrades at this time. Whether we keep or sell we will replace carpets in two rooms. That's about all it needs.

So the cashflow if rented would be approx $15k/year. Remember that would be split between me and my brother.

My question is would I/we be better off selling the condo and reinvesting that money in other properties that could generate better cash flow?

I'm more interested in cash flow than equity at this time. Thanks in advance for your input.

Edward

Brett Chaponot · Answer

It depends on you and your brothers personal situations. Knowing what you've listed I would keep the property and get a renter in after background and credit checks. The biggest complication is the business plan between your brother and you. How will you value a buy out if one of you needs to cash out? Who's responsible for what duties of the rental? If you can settle these things than I love the idea of expanding your investment portfolio together or separately. Borrow against the equity so you're still cash flowing on the first property at a good rate to pay expenses. This would be an awesome retirement plan for both of you!

Cynthia Mompt · Answer

Are you interested in remaining in the Greater Boston market or are you considering other markets? $575K could get you a multi-family (or numerous multi-families, if not a small apartment complex) in some markets (not necessarily in Boston MA). In such instances, your cash flow would increase notably. Even in the suburbs of Boston, you still can find a 2 or 3 family in the $550K range with each unit generating 1500-2300/month. Factor in property management (as opposed to HOA), your cashflow should still be greater than what the condo would generate. Also, in the right market your equity will likely appreciate faster as well.

Therefore, I'd recommend cash now and you can invest as you wish.

Lastly, your profile says you ae in CA, have you considered who'd "manage" the property for you if you held the condo (of course HOA will handle exterior)?

Therefore, I'd recommend cash now and you can invest as you wish.

Lastly, your profile says you ae in CA, have you considered who'd "manage" the property for you if you held the condo (of course HOA will handle exterior)?

Art Herbert · Answer

Beware of Family ! I would sell I think, then re invest for your self... makes it alot easier at the holiday times..

Brett Chaponot · Answer

Great to hear a resolution @Edward Mills. I like hearing the conclusion to these BP threads. Let me know if you'd like to reinvest any of the proceeds into a local property. You have a lot of great areas surrounding you. Invest in where you know and now you don't have multiple family members to make decisions with! Maybe...

Edward Mills · Answer

We met with the estate attorney today. She recommends selling because of the liability issues if we rent it while the estate is in probate. So I think that's the way we're going. Thanks for checking in Brett!

Brett Chaponot · Answer

@Edward Mills So whats the plan?

Justin Repp · Answer

@Edward Mills as others have mentioned you probably could do better to sell and reinvest in an asset that produces at a higher rate of return. Where is the property located? Depending on where you are is going to be a huge driver for how you make your decision.

Jim Sestito · Answer

@Edward Mills sell, sell, sell.

Anthony Micklus · Answer

I think @Art Herbert makes a good point. Some families just don't work well together in business relationships. If you do decide to keep it make sure you and your brother draw up a clear contract that spells out very specifically what everyone gets and what everyone is responsible for. If you don't think your brother is amiable to this definately sell it split the money and use the proceeds to invest in something else.

Inheriting condo - Keep and rent or sell and reinvest?

Inheriting condo - Keep and rent or sell and reinvest?

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