RentOrSell in FL, then Buy in DC

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RentOrSell in FL, then Buy in DC

AJ Rivers
Lexington Park, MD · Member since 2015 · 3 posts · 0 votes

In 2010 I bought a property (townhome) in FL (20653), and in 2012 I started renting it. I'm about to move to the Washington DC area (as renter) for work, and coincidentally the tenants have expressed a desire to buy the house. Some of the numbers are:

Original Mortgage = $104K FHA Loan @ 4.25%

Mortgage Balance: $97K

Mortgage payment+PMI+Insurance+Taxes (all 2014 numbers)+HOA=$1010/month

Rent: $1050/month 

Currently town-homes sell for $127K (same # bed/bath)

I have a desire to buy an apartment in DC if it makes financial sense. The dilemma is that I may need the profits from the sale for a down-payment. I'm not quite sure how the trade-off analysis should be done here. The scenarios I've played in my head so far are:

1) Sell FL property in 2015 if 20653's avg. home value is expected to increase more than in DC . Use "profits" towards down payment for DC apt.

2) Keep renting FL property and buy a property in DC. 

How would one go about this analysis?

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  • Cal C.
    Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    No brainer- sell.  If you include vacancy and capex reserves you are losing money every month.  

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  • AJ Rivers
    OP
    Lexington Park, MD · Member since 2015 · 3 posts · 0 votes
    11y

    Yes, I am loosing money on a month-to-month basis. But, what about the unrealized "gain" due to the increase in the property's value?

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  • Cal C.
    Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    Not sure what you mean by unrealized "gain."  Are those future gains? 

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  • AJ Rivers
    OP
    Lexington Park, MD · Member since 2015 · 3 posts · 0 votes
    11y

    When you say I am losing money every month, you are right. However, the property's value has increased (25%). 

    I guess what I mean is that if it is expected that the home values will increase in avg. 8% in 2015 in the 20653 area, then I would be willing to "lose" money every month, as I would recoup those when I sell it. 

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  • Cal C.
    Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    Who is expecting it?  There is always great debate whether to count on appreciation or not. I'm on the side cash flow with appreciation as a bonus, having learned my lesson.  Please see this thread.  How my 5-7 year plan went to ....

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  • Jordan H.
    Investor · Washington, DC · Member since 2014 · 34 posts · 11 votes
    11y

    I think you should sell.

    I can't speak for Cal but it seems his point is not to settle for realized losses based on the potential for gains through appreciation.

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  • Jesse T.
    Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
    11y

    It they are willing to pay in the 120-125K range, selling is quite clearly the better option.  I would really consider any offer over 115K, since you won't have agent, carrying or repair costs.

    Was the FL townhome your primary residence?  

     You may be in the 2 out 5 year window where your capital gain is partially deductible - although your depreciation for the time as a rental will be recaptured at your income tax rate.

    On the plus side a new purchase with a down payment should get a better interest rate.

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