Should I sell or rent my condo?

4 Replies

BP community, I’m having trouble deciding whether to rent my condo or sell it. I’m going to lay out all the numbers here and hopefully some people will chime in with their thoughts. 1 bed/ 1 bath condo in north New Jersey (~10 min bus ride to midtown Manhattan) May 2016 Purchase price: $270k Down payment: $54k (plus 10k in closing costs) Current market value (best estimate): $325k Mortgage remaining today: $205k Cash flow per month as rental: $300 The way I am looking at this is I am deriving my “net equity” (net of selling closing costs) to be: $325k x 94% = ~305k, less 205k (mortgage remaining) = $100k net equity. Therefore, my RoE on an annual basis is $300 monthly cash flow x 12 = $3,600 divided by my net equity of $100k = 3.6% On one hand, it seems like I could use that $100k elsewhere and likely beat 3.6%. On the other hand, the location of this property has seen very consistent appreciation and over the long-term is highly likely to continue going up in value at a higher rate than most other areas of the country. What are your thoughts?

Nick,

Great problem to have. I think you're looking at this the right way. $300/mo cash flow for a $325k property isn't ideal, but might be worth it if it's appreciating. A third option is to HELOC your $120k equity to get $85k or so to invest somewhere else. Keep your place until it appreciates more.

Good Luck!

Chris

I don't think there's a right or wrong answer in your case and a lot of it comes down to your own goals. I agree, you can get better cash flow somewhere else, but likely the appreciation won't be there. But appreciation is no slam dunk around here either. Which town/city? Some are appreciating nicely, others are plateauing, and still others have median prices for condos that are going down. At this price point I'd be looking closely at all the things that affect affordability. Interest rates going up and the changes to SALT deductions will make it more costly to own, which in turn will put downward pressure on sales prices.