I need a bit of advice. I own a condo that I am currently renting out. The rental I get is $2800. The costs are $2750 broken down as follows
Principal and Interest = $1850 [30 year fixed at 3.5%]
Taxes = $600
HOA = $300
Renting the condo shouldn't be a problem as it is in a good school district and desirable area. Mortgage left on the condo is $375K (25 years left on the mortgage), similar condos in the community are selling for $750K. If I sell I will net around $300K after all fees (it was a primary home until recently so we will not need to pay taxes per the 2-out-5 rule]. If I sell I will invest all the $300K in VTI.
Would you advice I keep renting the condo as it breaks even with rent, or sell and invest the proceeds in VTI? Thanks for your time and advice
Once you factor in occasional repairs a month vacancy here or there this is a money loser... and you are only betting on appreciation for any kind of return on your $300k of equity. Hard pass on that deal.
Last edited by rascott on Tue May 18, 2021 9:28 pm, edited 1 time in total.
I’m in a similar situation. I’m listing mine for sale. The return on equity on mine (and yours) isn’t very good. Taxes and HOA eat into profit. Also, Tax free gain is hard to pass up. I’ll be putting it in total US/INTL index funds after the sale.
I am a landlord and I like owning property but I would sell this FOR SURE.
Your cash flow is pennies and your risk is big. When you factor in deferred maintenance, vacancy allowance, market risk, capex, bad tenants ruining the place, etc....
blue_red wrote: ↑Tue May 18, 2021 6:17 pm
Hello Bogleheads,
I need a bit of advice. I own a condo that I am currently renting out. The rental I get is $2800. The costs are $2750 broken down as follows
Principal and Interest = $1850 [30 year fixed at 3.5%]
Taxes = $600
HOA = $300
Renting the condo shouldn't be a problem as it is in a good school district and desirable area. Mortgage left on the condo is $375K (25 years left on the mortgage), similar condos in the community are selling for $750K. If I sell I will net around $300K after all fees (it was a primary home until recently so we will not need to pay taxes per the 2-out-5 rule]. If I sell I will invest all the $300K in VTI.
Would you advice I keep renting the condo as it breaks even with rent, or sell and invest the proceeds in VTI? Thanks for your time and advice
Saving the tax tips it over. If there was any doubt before:
- prices are shooting up, a rate of growth which is not sustainable
- you save the tax
- 300k to redeploy into your investment portfolio
- current investment is cash flow negative
You might be selling a year early. But it's easier to sell a year early than a year late.
I would sell. You are in a roughly breakeven best case for renting the condo. There are too many headaches with rentals to make this worthwhile. Also, this is a seller's market. A great time to sell.
carolinaman wrote: ↑Wed May 19, 2021 8:17 am
I would sell. You are in a roughly breakeven best case for renting the condo. There are too many headaches with rentals to make this worthwhile. Also, this is a seller's market. A great time to sell.
thank you everyone for your advice. I have decided to sell the condo within the next 12 months.