How to determine if I should rent out/sell condo

Question

Hey everyone. My wife and I are looking to move out of our condo (we live in south suburbs of Chicago) and into a new house. After talking to our lender and realtor I realized that I can take a loan out against my 401k and use that as the down payment on our new house. Because of this we don’t necessarily have to sell our condo to come up with down payment money. Real estate investment has always been an interest of mine but something I thought was 5-10 years down the line.

The condo is located in the south suburbs of Chicago. 2 beds 2 baths. 1200 sqft.

I basically have no idea what I should/shouldn’t do and would love any kind of advice to help!

The condo is located in the south suburbs of Chicago. 2 beds 2 baths. 1200 sqft.

I basically have no idea what I should/shouldn’t do and would love any kind of advice to help!￼

John Warren · Answer

@Dan Taylor you have had lots of great advice on here. When it comes to holding a condo, you have to also think of the HOA and think through if there is any deferred maintenance that will turn into a special assessment in the near future. People love the idea of condos because the association takes care of the exterior, but not all associations are good at budgeting for these events.

Mark Ainley · Answer

@Dan Taylor I am a buy and hold investor and I think you should always hold for as long as you don't have anywhere else to put the money that will provide a better opportunity. I imagine being owner occupied your current loan rate is super low so that is an opportunity to take advantage of. If it isn't you should be sure to refinance before you move out. Let me know if you need help with rental rates. Like @Tim Herman said touch base with the HOA to see what the rental caps are or confirm they are even allowed.

Dan Taylor · Answer

@Tim Herman thanks Tim you’ve given me a lot to think about. Definitely can see being under the control of the board! Lots of research to come!

Tim Herman · Answer

@Dan Taylor what do the numbers tell you. Run it through a rental calculator like on BP. Is it cash flow positive. What is the return on equity? Only you can answer the question. Now since it is a condo. Can it be rented. Does the board have to approve all tenants. What are the reserves in the condo association for future capex. Have their been any special assessments? What is your out later? Is the condo warrantable ie more owners vs renters. Allows low down payment to buy for future owners. You are at the mercy of the board. If the board decides to do new roofs and they don't have enough reserves you will get hit with a special assessment. The board can decide to limit rentals. You will give up a lot of power to the board. I know some people make good money by renting condos, but for me I want to be in charge of my own finances.

How to determine if I should rent out/sell condo

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