To Hold or To Sell - Southern Oregon

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To Hold or To Sell - Southern Oregon

Lisa Zak
Member since 2022 · 3 posts · 0 votes

Hi..

This is my first post! :) - I'm still living in the condo I bought foreclosed in 2015 and now have $150k in equity. I can't currently rent my place out due to HOA ratio / rental rules..but can rent out a room that would almost cover my mortgage which I plan to do. However I'm at the same time I'm also considering selling to cash out the equity, pay off some debt and reinvest the majority of it in the one bedroom condo....the owner said she may carry the loan @4.5% (if she doesn't carry then I wouldn't sell). The same rental ratio's apply to both condo's...the 1bedrm would sell for around $200k.

Thanks for your feedback :) - Lisa

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  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    4y

    @Lisa Zak  1) keep in mind that  if you sell - there are  selling  expenses  of  approx  2-8% depending on  state / if you use  realtors  etc ....so make sure the  projected   sales  proceeds  you are thinking of are  calcualted  accurately  2)  Does the seller  of the  1  bed  condo  own it  free and clear ?  if not  -  how would she be able to sell it and carry the private note ?  3) why is  carrying a private contract  crucial ? is it  because  you cant get  financing  ?  or beacuse  4.5%  rate is slightly better than  presnt market rates ?  is this a  condo unit in the same  complex  you are in now ?

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  • Lisa Zak
    OP
    Member since 2022 · 3 posts · 0 votes
    4y

    Thanks Dave..

    Yes - the condo is in the same couples as mine...it below the one I'm currently in. And Yes she owns it free and clear and I will not qualify in this moment. I would try and sell it myself "For Sale by Owner"...tho could also just sell mine and wait till the market falls some and buy a house in the future. Tho realize rates may also be higher in the future. Another option could be to invest in the 1bedroom condo with a real estate investor...but would have to wait till there's another rental space available which could be a year from now..hard to say. Seems altho condo's are less expensive to buy there are challenges to renting them out. The unit I'm living in now is my first real estate purchase and it was foreclosed. 

    Thanks again for your feedback.

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  • Cory CarlsonBusiness Member
    Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes
    4y

    The answer to this question lies in the mathematics. Hard to advise what to do with your "capital/equity" without knowing where are you today. This means running current scenarios, refinance, sell/exchange/reinvest and comparing all the strategies. The 4 major return metrics would come into play and be compared. 

    1) Pre-tax cashflow

    2) After-tax cashflow (after effective tax rate, depreciation and interest expense deductions)

    3) After-tax cashflow + Pay down (same as #2 but adds principle pay down)

    4) Total Return (After-tax cashflow + Principle Pay Down + Appreciation-X%)

    Simply put the strategy here could be to keep your space, reposition yourself (refinance) and see if there is enough capital to do something else with. You can keep the condo as your "principle residence" to avoid the HOA headaches. Second strategy would to quantify your net proceeds from sale and if you could find something else that fits your needs but is a better "investment". What i say when advising and consulting on these types of situations are to draw the line in the sand somewhere between utility and investment. Its impossible to quantify both but they can be taken into account if the vision is to eventually turn the next acquisition into a buy/hold rental.

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