Rent or Sell?

[Shawn M.]

Mom owns a condo but due to health issues can no longer go up and down stairs (condo is on second floor). We are looking to rent a ground floor apartment for her near us. As for her condo we are debating on whether to sell or rent. She purchased unit 10+ years ago putting down $7,500 but then refinanced (rate 6.75%) during the housing boom. She can most likely sell property for about $13k more than she paid however after agent commissions and closing cost she would walk away with only $7,500. Or we could rent the unit, which after all expenses including mortgage, would have a positive cash flow of only approximately $100 per month. The association is in good financial shape with reserves and recently had all major maintenance items (roof, painting, paving, etc) completed. Would you keep the property as a real estate investment or sell it?

I appreciate any insight you can provide.

[Jerry W.]

@Shawn M. , I would suggest seeing how much principal you pay down on the loan each month as a way to determine the real monthly benefit. Another possibility is for you to just buy your mom out for that amount and save her the hassle. If you could refinance for 4% to even 5% it would probably increase the monthly cash flow a fair bit. I cannot do a real analysis without having sale price, mortgage amount, monthly payments, monthly rent, taxes, insurance, interest, etc., but consider the possibilities. Unless your mom has substantial assets to cover possible nursing home care in the future, it may not hurt for her to divest assets to get past the 5 year look back for medicaid.