To Sell or Rent a Condo in 55+

[Meaghan Lugo]

My husband and I will be taking my in-laws into our home due to health issues. They have a paid off Condo (1/1.5) in a 55+ community, not the most desirable area so worth approximately $100-115k. We will need to mortgage the condo or sell it in order to outfit our home (and my brother-in-laws home) for my in-laws to live privately and comfortably. What would you do? Facts to consider: The condo is in my husbands name, has been for about 5 years so the capital gains taxes would be ours to pay upon sale. Property Taxes $1200 annually which we've been paying. HOA $325 monthly. Conservatively, rent would be about $1000-1200 monthly based on our research. We do have 4 other properties we rent with significant equity so using equity from one of those is on the table as well. This would allow us to just rent the condo without placing any financing on it, or to 1031 the funds from the sale of the condo and still have the needed funds to complete the work on our homes to accommodate them. Lastly, our DTI is maxed out per every lender we've spoken to recently as all the properties are mortgaged in our personal name. So we'd be looking at DSCR or other funding that doesn't consider our personal DTI. Ideas? What are we not thinking about? Thanks in advance.

[Joe Morello]

Getting financing on condos in general these days is nearly impossible, let alone a 55+ condo. And selling it will be challenging as well as the 55+ condo market is flooded here in South FL. Tons of competition. That said, I think renting it out is your best option. You should always have a tenant as you're not only serving the 55 and over community (which will continue to grow), but the lower income demographic as well, which is needed. Just be aware of potential special assessments that may be in the works or could potentially come about, and factor in continued increases to the monthly COA fee. So, give yourself enough room to cover future increases with how much rent you charge. 

[Meaghan Lugo]

Quote from @Joe Morello:

Getting financing on condos in general these days is nearly impossible, let alone a 55+ condo. And selling it will be challenging as well as the 55+ condo market is flooded here in South FL. Tons of competition. That said, I think renting it out is your best option. You should always have a tenant as you're not only serving the 55 and over community (which will continue to grow), but the lower income demographic as well, which is needed. Just be aware of potential special assessments that may be in the works or could potentially come about, and factor in continued increases to the monthly COA fee. So, give yourself enough room to cover future increases with how much rent you charge. 

 Thank you. Association president is a family friend so we hope to get clear information on all things association before taking any steps. Appreciate the feedback!

[Ray Hage]

Hi there @Meaghan Lugo, I'd probably lean towards selling it based on all the info you have given but @Joe Morello makes a good point. There are a lot of condos on the market right now and I expect there to be a lot more in the near future. So you could try selling now and see how much you can get (and if it is worth it to you). If you can rent it out for only $1000, I don't think the numbers will make much sense especially if you will need to finance it. Even at 7%, I feel the numbers to be a bit tight. Which area/city is the condo in? 

[Meaghan Lugo]

@Ray Hage I hear you. The interest rates are tough. It’s in Lauderdale Lakes area. 

[Ray Hage]

Quote from @Meaghan Lugo:

@Ray Hage I hear you. The interest rates are tough. It’s in Lauderdale Lakes area. 

 Oh ok yea not the best over there. If you want to put it on the market at some point, I'd be happy to help. I am mainly an investor but also a realtor/lender as well. If you plan to put it on the market, I would say better to do it sooner rather than later. I have a few clients that have asked me about buying investment condos and I generally tell them to not consider it vs a house/multifamily

[Meaghan Lugo]

Thank you. Yes, If we were looking to buy another investment right now we definitely wouldn’t buy this, but since we technically already own it we wanted to weigh all options. 

[Joe Morello]

Quote from @Meaghan Lugo:

Quote from @Joe Morello:

Getting financing on condos in general these days is nearly impossible, let alone a 55+ condo. And selling it will be challenging as well as the 55+ condo market is flooded here in South FL. Tons of competition. That said, I think renting it out is your best option. You should always have a tenant as you're not only serving the 55 and over community (which will continue to grow), but the lower income demographic as well, which is needed. Just be aware of potential special assessments that may be in the works or could potentially come about, and factor in continued increases to the monthly COA fee. So, give yourself enough room to cover future increases with how much rent you charge. 

 Thank you. Association president is a family friend so we hope to get clear information on all things association before taking any steps. Appreciate the feedback!

Great. Definitely see what's going on with the COA and make sure they have all of their ducks in a row with regard to reserves and proper budgeting...Most don't. And I see it's in Lauderdale Lakes, which is probably the most saturated area in South Florida for B-D class condos. I get sent fractured condo deals all the time that are located in Lauderdale Lakes. So, unless you're willing to take a significant discount to get rid of it as there will be tons of competition, hopefully the numbers work to rent it out. If you try to sell, offering seller financing could give you a leg up. Something to consider. Best of luck! 

[Theresa Harris]

If it isn't in the most desirable area-does that mean it is in a bad area or just not in a A class area? Honestly if your DTI are at the limit already and your parents need the money, sell it.

[Allan C.]

@Meaghan Lugo I suggest doing some research on national and regional age demographics over the next 10, 20 and 30 yrs. This would be a data point I’d find useful to determine if I hold onto a 55+ property. You can then determine the best time to sell based on your own personal situation as well as macro supply/demand factors at the time you wish to sell. Alternatively you may determine it’s best to hold.

[Meaghan Lugo]

Thank you. @Allan C. looking at the data is always a smart idea.