Hold.

Sell the condo and buy a small townhouse. Assessments and condo boards will eventually eat your lunch. All it takes is one or two power trippers who want to redo the lobby into Baroque style and you will be broke.

Plus, let's say the number of renters increases and you will either a) have moratorium on rentals from your board which could impact your ability to rent (presumably you would be grandfathered in, but they could decide to do a lottery or round robin or such) b) if over 50% rentals in a condo, you cannot sell easily b/c buyer can not get access to GSE financing.

http://www.realtor.org/sites/default/files/gse-fha-condo-chart-2013-01-18.pdf

Are you aware of all this? Condo investors are for folks who are very liquid, and are in it for a long term so you can ride out crazy boards or wild assessments (which are out of your control, unlike a fee simple property where you can cut corners or defer etc to match your budget).

Anonymous wrote:This situation describes me exactly too, from breaking even, to the amount I would lose if I see. PP, you make a good point about income stream, however, what about the opportunity costs of taking this money instead and investing it either in a different property or just in a mutual fund for the next 20 years. Wouldn't this make more sense in the long run? Assume a $300k condo.

PP here: its really the initial downpayment and the upkeep (anything that you pay that is not covered by the rent) that is your opportuntity cost. Generally speaking, you need about $800,000 yielding you 4% to get you 3k a month (apologies for any errors in math). In the end, it should all work out the same, but its really how you get there with rental income (by using other people's money) that is the benefit in my mind. Or as you suggest you could put your money into a fund, but that would be mean (say you put in 100k), you need it to go 8x where it is today (not including dividends reinvested) to get the same result over the same period. Could happen, maybe not.

Look at it as the renter is paying off your mortgage. Eventually it will be paid off and you have a revenue stream and an asset that should appreciate at least with inflation.

We just struggled with a very similar decision. We own a townhouse, and we decided to actually move back in. I wanted to sell and be done with it - I don't want to live there, and it is a matter of time before we have a huge expense of having to replace A/C or something like that. But we would barely cover the mortgage and the agent's fee - and if it doesn't sell fast or for the price we need, we do not have much cushion to cover the expense. We decided to move back in, refinance to lower the payments (we can't refinance it as an investment property), and take our time to sell it. Not what I was hoping for, but better than ruining our credit...

Anonymous wrote:OP here
Condo is in South Arlington/Arlington area. Buildings are older but solid. It is a very nice and well maintained community. Condo association is in very good shape and all that. Our unit will eventually need some work though- kitchen is older but looks nice, bathtub could stand to be replaced, windows are older but fine. I just worry about having to do all that at some point. I also worry that while condo prices may eventually go up, our unit's worth will go down as it gets older and beat up. I also hate dealing with finding new renters every year. I'd be fine if we found someone to stick around for a few years.

I'd also love to get the money back that we have tied up in the condo so we could do some big projects around our house.

I guess we will see what happens and maybe review things next year.

As a renter, I don't care so much if the kitchen, bathroom and windows are older. As long as everything is clean, doesn't have grim built up from the years, and the grout looks new. Old window are only an issue if they are poorly insulated and I am paying utilities. Spend the money on renovating your house instead.

OP here
Condo is in South Arlington/Arlington area. Buildings are older but solid. It is a very nice and well maintained community. Condo association is in very good shape and all that. Our unit will eventually need some work though- kitchen is older but looks nice, bathtub could stand to be replaced, windows are older but fine. I just worry about having to do all that at some point. I also worry that while condo prices may eventually go up, our unit's worth will go down as it gets older and beat up. I also hate dealing with finding new renters every year. I'd be fine if we found someone to stick around for a few years.

I'd also love to get the money back that we have tied up in the condo so we could do some big projects around our house.

I guess we will see what happens and maybe review things next year.

It should read "if I sell" not see.

This situation describes me exactly too, from breaking even, to the amount I would lose if I see. PP, you make a good point about income stream, however, what about the opportunity costs of taking this money instead and investing it either in a different property or just in a mutual fund for the next 20 years. Wouldn't this make more sense in the long run? Assume a $300k condo.

I would keep it for an alternate income stream. As you are breaking even,you don't even have to do anything. In 15 years or whenever that time is for you, that's a tax advantaged diversified source of income. Once you focus on the income side, the market value side will mean less to you. FWIW I have two condos that I rent out and anticipate brining in about 3k in today's money in eight years when mortage is paid off. As my main house will be paid off then as well, its almost enough to retire on.





If you want to keep it solely for capital appreciation, then it might not be worth it to you as there are too many "ifs." However, if you want to keep it in order for it to provide an income stream for you in say 15 years, then it may make sense to keep it. You can do the math and figure out when it will be. The actual market value of the condo is secondary at that point.

Anonymous wrote:I wouldn't sell if I were you. I know there are many people that will save otherwise, but I believe housing prices will rise.

Maybe don't take your advice from someone who doesn't know how to spell 'say', and who supports their gut feeling for a complicated market.

Where is the condo located? Is it an old building that the condo association is struggling to maintain? That makes a difference in whether sale prices and/or condo fees will go up.
Are you sure your rent is compatible to the market in your area?

I wouldn't sell if I were you. I know there are many people that will save otherwise, but I believe housing prices will rise.

Where's the condo? I know people in DC are holding out, but people in the suburbs are tending to sell because you're right if that's what you're talking about - the market won't increase in further out places.

We have been renting out our condo for the past 3 years. Financially we break even on the rental, minus the time it takes to get it ready for the next renter and small fixes here and there. So far nothing major has happened, but i dread having to sink any money into this place. My husband wants to keep renting it out, but I am ready to just cut our losses and move on. I don't see the condo market increasing in the foreseeable future or for us to even be able to sell it for what we paid. Right now it looks like we'd lose around $30K if were were to sell- factoring in the difference in what we paid versus could sell for and realtor fees. So not an easy pill to swallow, but I feel like we'd lose even more info we hold onto it longer- kitchen is older and there could be more damage from renting. How do we decide what to do? What would you do?

Oh and we would not have to pay our losses out of pocket as we have enough equity in the condo that we would end up getting a chunk of money back.