To Rent or To Sell? A Condo Owner’s Dilemma

[Rahul Raghav]

Hello, everyone. I am a new condo owner in South Loop, Chicago. I bought a 2-bedroom condo in this area this year (2023), after renting for 11 years. I thought it was a good investment (for renting it out after living for first year), but now I am having second thoughts.

My condo has a high monthly HOA fee of $700, which covers amenities like a gym, and a doorman. The maximum rent I can get for my 2-bedroom condo is around $3,000, which is barely enough to cover my mortgage, taxes, insurance, and HOA fee. That means I will have a negative cash flow if I rent it out.

On the other hand, if I sell it now, I will likely lose money on the deal. I bought my condo for $400,000 last year, and I still owe $360,000 on my mortgage. I will also have to pay capital gains tax on any profit I make from the sale, since I have not lived in the condo for at least two years.

So, what should I do? Should I rent it out at a loss or sell it at a loss or no profit next year (long term capital gain tax)? I would love to hear your opinions and advice on this matter.

Thank you 

[John Warren]

@Rahul Raghav I am not a huge fan of holding an investment that statistically will lose money. You just purchased it last year, which means you are unlikely to see a capital gain. If you sell now, you won't really worry about tax implications at all. Selling now simply rips the band aid off quickly so you can focus on other opportunities. 

I have helped quite a few of my friends sell their condos over the years where they rented them out for a decade. Years of wear and tear can turn the beautiful unit you loved into a tired rental. Often times the values on condos don't go up enough over time to justify the hold if the cash flow isn't there, and there are too many variables like you mentioned with the big HOA fees, etc. I would look to sell now.