Thoughts on the Auburn Area Market? Sell or Rent?

Question

Hey BP! So I'm a new member here and I currently own a nice 3 bed, 2 bath, 1 car garage condo up in the Lake Tapps/Lakeland Hills area. I happened upon a great deal on my condo (I believe I found it on Zillow by sheer luck) because of a short sale about two years ago when I was simply looking to buy vs rent as I was tired of moving around each year and trying to remember what my actual address is. I never realized the opportunity that I had stumbled into but I'm in a fortunate spot to really reap the rewards from it now.

With that said, I'm going to have to relocate out of state and I'm looking for some advice on whether I should sell for a sizable profit in this crazy market or keep my condo and rent it out as it can cash flow with the current rent prices in the area. I'm meeting with a property manager next week to get their opinion on things but I'm still trying to do my own research on it for obvious reason. I've also talked my realtor and he says the market is ridiculously hot and that pretty much everything he's sold minus one property has sold over by 5-15k above asking price so now would be a great time to sell. So that basically leaves me with the million dollar question, sell while the value is higher than it's even been for my condo (reinvest a large amount of it elsewhere after) or hold and rent it out for some cash flow?

I've looked (or I believe I have anyways) at all the numbers for renting and at the current rates with a property manager I can cash flow anywhere between $100-250 the first year followed by $170-350 year two depending on what we charge for rent. I could generate even more cash flow without a PM but given that I'll be living out of State and traveling that's pretty much not an option at this point. Ideally I would rather rent and hold but if the rental prices drop over the next couple of years I'll see a potentially significant hit to my cash flow.

The flip side to that is I can simply sell and cash out now while the market is good. I plan on reinvesting a significant chunk of that into other rental properties elsewhere so the profits would go to good use but part of me wonders if its worth holding onto this condo for longer and see if it'll appreciate even more and use the cash flow to pay down the current mortgage even more.

Thoughts?

Kimsua Chay · Answer

Sorry for the really late reply everyone. I appreciate everyone's input but my work schedule became real hectic the last two weeks and I ended up putting my condo up for sale after all. My plans are to still invest the profit elsewhere in rental properties and slowly build my portfolio over time.

To answer a few questions though just for anyone else out there reading this and possibly in a similar situation I'll try to respond.

As far as numbers go, I purchased the condo two years ago as a short sale for 135k. It took about six months to get it all done because the previous owner had two mortgages and we had a tough time getting responses from both. After we finally heard back, they counter offered at 150k (my initial offer was 127k or so) and we settled on the listing price of 135k after I told my realtor that was the highest I would go. I lucked out in finding the place on Zillow I believe as it had one picture of the exterior of the condo but nothing else. I decided to check it out anyways as I was scheduled to take a look at a few short sales and realized that with some work this place had a ton of potential. Of course that was with my original intention of staying for awhile vs flipping or renting it out for a profit. Once the previous owner moved out (that's a whole other story in itself as he refused to leave at the agreed closing date) I found that he had left the place in worse condition than when we last saw it. I had plans to remodel anyways and due to some contacts from my realtor I was able to save a ton of money and ended up only spending just under 9k for a lot of work. That includes a new quartz counter top, re-flooring to included laminate hardwood floors, high end stain resistant carpets in the rooms, new designer paint and trim, new master bathtub/shower and tiles, new tiled fireplace and some other things plus all labor. It was a one man show and took some about a month and a half or so but I wasn't in a rush and it was well worth the wait.

I'm not sure if I should put out too much info yet since we just went under contract but we recently listed my condo and found a buyer within a few days. We had a few offers and went with the highest one as it was a strong buyer basically got what I was hoping to get. Once it's all said and done I'll put exact numbers here but I figure I'll hold off for just a bit for now.

@Ruth Bayang Wish I could have made it but I was out traveling for work and flying a bunch of redeyes. barely had time to eat and sleep!

@Christian Wathne Sorry I'll get those numbers here in a few weeks once the condo closes. I'm not hiding anything but I'm also not sure if I should post anymore numbers given my full name is probably searchable through here.

@Cindy Liu I'm not quite sure when the last major assessment was but they literally just replaced all the roofs here last week. There's an annual $350 assessment they charge every year that plus they recently raised the monthly dues from $271 to $325. I ran that as part of my numbers if I were to rent which was why my rent would have had to have been pretty high to really cash flow any real decent numbers. That said, I haven't heard of anything coming up either but as you said I have no clue if they have anything else planned for the future.

Adrian Chu · Answer

Since you lived there for 2 years, your capital gains would be tax free!

Cindy Liu · Answer

For condo, bear in mind there will generally be special assessment every 7 years for painting the outside wall, etc. This can be easily $10k-$20k. Many short sales or foreclosures come from owners that cannot pay the special assessments.

If your HOA has not collected special assessments for about 7 years, sell now. The board may already discuss it and you just may be unware. Once there is special assessment, you can bet that the buyer will take the amount off the offer price.

Ruth Bayang · Answer

@Kimsua ChayMake sure you attend this event today (june 23) and tomorrow (June 24) in Bellevue!

Christian Wathne · Answer

@Kimsua Chay give us more numbers. What would it sell for and what would it rent for; what are your costs to hold and what is your total investment to date? any big maintenance items coming up (ie, needing to replace water heater/etc). Have you checked with your condo declarations about renting is allowed (I've had issues with that in the past). How are the condo association's financials? ie; do you think a large assessment will be coming up?

What are your long term goals? Are you wanting to build a rental portfolio?

Kimsua Chay · Answer

@Matt Gragg @Jennifer Beadles

Thanks for the replies! The condo is starting to age (I want to say 16 years old) so I know those other factors have crossed my mind. The numbers show cash flow now but as you guys have mentioned it wouldn't take much to eat into that. I've got a property manager coming tomorrow to take a look and give me their thoughts but I'm leaning towards selling unless they somehow can show me some good numbers to convince me otherwise.

Jennifer, I was planning on reinvesting the profits from the sale in the Midwest and TN was one of the area's I was looking at. Any chance you'd be interested in chatting about that?

@Ruth Bayang

Ideally I'd like to keep it for long-term cash flow. But my biggest worry is how sustainable the rent/cash flow would be long term and quite frankly my condo would probably go for more than it was ever worth in the 07 bubble. So part of me wonders if I should walk now with a substantial amount vs the cash flow numbers I've posted for the first two years. That said, if I had a crystal ball and knew that this condo would hold its value as it is now I would be fine renting it out for a few years and re-evaluating later of course.

Ruth Bayang · Answer

There's no right or wrong answer here, just what's right for you.Auburn and all of south King county is hot right now. So, yes ... selling would be a piece of cake.

But it would be good to keep it if you want long-term cash flow.

Again, it's whatever is right for YOU.

Jennifer Beadles · Answer

I would agree, sell now and make a good profit. Your monthly profit that you speak of is not that great really. Depending on where you go, or regardless really the money that you make on this could be used to get a much higher rate of return with less output. We are finding great markets in Indianapolis, and Nashville TN.

Matt Gragg · Answer

Sell it if you can profit from it now! That is a great area but is growing like crazy and I think you are at the top of the market for the area at this time. Also depending on the age of the unit. It will start to need up-keep like plumbing valves, hot water heater, appliances etc as you can probably see. This will cut into your profits.

Thoughts on the Auburn Area Market? Sell or Rent?

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