Need Advice on 'Selling" or "Renting" A Condo I own

[Omar Pena]

Hello BiggerPockets Community. First time blog posting and I could use your advice! Your insights and comments will be appreciated!

Here is my situation:

I own a condo in NY (Queens borough) since 2002 that I’ve lived in and still live in for most of those years since. From that perspective its been good for me.  However, I purchased a condo specifically to have flexibility with renting when and if I needed to. I had moved out for a few years but had to return and I then had to deal with my tenant who would not get out and so it turned into a whole eviction process. An eye opening process especially here in NY.

I know that I want to move on from living in the condo as I have contemplated a change for a while. I’ve lived here many years and feel its just time for a change. Additionally, my immediate family who live in pretty close proximity to me (Parents & brother) are all moving to Florida soon. Being close to them was a pretty good reason to be nearby but with them leaving, that’s one less reason to stay where I’m located specifically. With that said, I have been on the fence about my options:

#1) Sell the Condo – Sell it outright and use the proceeds to rent temporarily somewhere until housing prices cool and buy then or buy investment property

#2) Rent the Condo – This would mean I move out, buy a new house but keep the condo and rent it again

In either scenario, I would be moving to Long Island, NY to be closer to my kids. There are pros and cons for each option which I will spell out below. I have been leaning towards a sell and getting out before what seems like an eventual downturn in the market. I want to make a decision by June2023 which is less than a week away

Year of Home Purchase                           2002

Year of Home Mortgage Payoff              2032

Mortgage Payoff Amount                        ~$54K (Slightly under)

Unit                                                              2 BR / 2 Bath + Balcony (1050 sq feet)

Building Complex                                      5th Floor of a 6 Story Condo (Part of a 2 Building complex)

Note: Refinanced to a better rate when 20 yrs was left on mortgage to a 20 yr loan (rate of 3.875%)

Financical Stats:

Costs While I Live in Condo

Mortgage (PITI): $933.00 + HOA: $1,256.00 = $2,189.00

PITI (Principal/Interest/Taxes/Insurance) per month

Note: Mortgage is inclusive of PITI (Principal / Interest / Taxes / Insurnace)

Note: HOA Covers Building Insurance, Super/Porters; Garbage/Snow Removal/Landscaping/Cleaning of Interior & Hallways; Covers Water Usage & Home Heating/Cooking (per month)

Costs If I Rent Condo (Includes expenses above plus these additional ones)

Condo Costs: $2,189.00 + Condo Sublet Fee: $250.00 + Vacancy: $183.00 + Renters Insurance: $10 = $2,632.00

Note: The Condo requires a $250 sublet fee if I rent out my unit; They do this to discourage rentals and keep units mostly owner occupied

Note: Vacancy per month equals the monthly cost (1/12) of 1 months rent

Decision - Keeping Condo & Rent It

Pros

1. Through Rental, tenant will pay off my mortgage over time (10 years remain)
2. In 5 years when the mortgage is down to half amount for example, I will prob have the flexibility to just pay the remainder outright and have a unit free and clear

Cons

1. The maintenance costs are a bit crazy to me but not necessarily out of the norm; There is an assessment that has just been levied for some major repairs and a 10 year loan has been taken out to do the repairs and minimize the per unit owner cost to a manageable size; That assessment is increasing maintenance to $1,256 p/month. A lot more than my PITI costs combined.
2. The condo charges a $250 sublet fee for renting out my unit; That would bring my total monthly expense over $2600; Based on what I researched I could get for rents in this area, not sure I can get $2600; Even if I could I would just be breaking even with no cash flow; Wont include amount needed for potential vacancy; The sublet fee kills my flexibility

Decision - Sell Condo

Pros

1. Would probably get top dollar on sale of home selling now; if there is a downturn it can be MANY years before I can get the money I would be able to get now (anticipate $425k to $450k)
2. Sell and use part of the money to buy new home for myself and/or use the money on alternate investment(s)
3. Keep the money liquid for opportunities that come up in the next 1 to 2 years
4. Free myself from the politics of the condo board and how the complex operates; A lot of the issues are financial in that over the years money has been collected and not well managed or spent which is why HOA fee is so high; this provides a level of inflexibility on managing expenses which I have limited control over

Cons

1. Don’t have that much left on mortgage; selling now would mean investing elsewhere via new long term mortgage at todays higher interest rates (albeit at smaller mortgage amt since I would be able to put down a larger down pymt); Additionally, at todays market prices, I would not be able to get a unit like this one for the price I paid over 2 decades ago and for the interest rate I have now
2. I have been wanting to build a real-estate portfolio and my thought has been that this would be my 1st unit in that portfolio and I should keep it & build from there; Selling would mean starting from scratch instead of building; However is this Condo Unit really a good investment? 

I'm hoping the amount of info I posted doesn't turn anyone off from responding. I tried to give the full story so that you knew where I was coming from. Again your insights and comments are welcome!

[Jason Lee]

Rents are at their historic peak right now so if you're not going to cash flow with vacancy (you will have some vacancy) then you can expect it to be worse when the rental market softens and rents dip. Meanwhile the sales market is pretty hot and inventory is way down (about 25% YOY for condos). Given the info you provided, I would probably sell now and take advantage of the cap gains exclusion.