Condo Connundrum in Fort Myers - Sell and Eat Loss Now, Rent or Try Owner Financing ?

Question

My partner and I bought a condo in Fort Myers in the Bellasol community in 2022 to provide housing for her brother's family after they lost their home in hurricane Ian.  They have since moved out and gotten a new home, and we have this condo now that we have to figure out what to do with.  We purchased it for $235k in 2022, but I would have to list it today for $199k which means we'd take a $36k haircut minimum.

We tried AirBnBing the condo which is fully furnished, and it was working well but we got in a bit of a tiff with the condo association as they have a rule that they have to approve every tenant with 30 days notice and fees for background checks.  This makes AirBnB a difficult proposition.

Monthly holding costs for the condo excluding repairs / capex are approximately:

Mortgage: $1783

Condo Fee: $403

Electric: $100

Water / Sewer: $200

TOTAL: $2486

We would never have bought a condo as a rental property, but as I said, we bought it to provide emergency housing in a pinch.  I think we have the following options; what would you do ?

1) Just list it, get it sold conventionally, take our lumps now and move on with life.

2) Try to rent it as a mid term or long term rental likely at a loss for a 3-5 years hoping that prices will rebound after the present oversupply of homes in FL is soaked up.  We could likely rent it at $1900 per month as a furnished mid term or long term, but our total holding costs are close to $2500 per month, so any potential price gains over 3-5 years will be muted by our losses in holding costs.

3) Pay off the mortgage on the condo by turning our Roth IRAs into SDIRAs.  Then do an owner financing deal where we can ask for a premium on the price.  There is higher risk here in some ways and there is the opportunity cost of having to sell off our stocks in the IRA.  In addition there will be a substantial amount of fees and work to set up the SDIRA, the cost of setting up the owner financing deal etc.  The best possible outcome here is that we might be able to ask for something like $220k for the condo so we might reduce our loss to $10k.  This seems like a high risk option with limited upside potential for the work and risk taken.

4) Other ideas ?

Brett Synicky · Answer

You’re a disqualified party to your retirement accounts so using your IRA to transact with you and something you own is a prohibited transaction and will result in a distribution of the entire IRA.

Self directing is a very powerful way to invest for retirement, but just like driving your car down the street. There are some rules to be aware of.

See the following articles

https://www.biggerpockets.com/member-blogs/2810/44738-prohib...

https://www.biggerpockets.com/member-blogs/2810/47960-disqua...

Jim Windgassen · Answer

I think we have pretty much decided to just take our lumps and list it for sale.  If for some reason we cannot get a reasonable offer, we will try the MTR or LTR path.

Thank you all for the feedback !!

Jules Aton · Answer

This is a shame because a $200,000 ish beach condo sounds relatively harmless on the surface. As I've gotten older I stopped believing renting is always throwing money away and appreciate the situations where renting is absolutely the best option.

I'd consider:

1. Circle  back to condo association, maybe enlist neighbor support and see if they have any flexibility in the rent restrictions which of course may change in the future but would buy you some time if cash flowing when you did STR. Any chance you could do a MTR to snow birds and use it yourself at other times? 2. List for sale and take the bath now. Everything else is likely putting off the inevitable and as much as I struggle with letting go there is something to be said for the sunk cost fallacy.

Best wishes with whatever you decide.

Stetson Miller · Answer

@Jim Windgassen How confident are you in your sale and rental projections? One additional thing to consider is that if you place a long term tenant, it's very common in this market for them to be responsible for their own utilities, so you may be closer to break-even with a long/mid term rental that it initially seemed.

Chris Seveney · Answer

Sell it and eat your losses. You are delaying the inevitable - unless you want to hold it for 5+ years and have negative cashflow, which I would not recommend.

Could you sell it subject to? What is your interest rate?

Jim Windgassen · Answer

My present interest rate is 7.125% so it is nothing to write home about.  I don’t think that is going to excite anybody.

Steve Harlow · Answer

I did not see your insurance costs.  Thats the klller there and its going to get worse.

Its also a market that is very cyclical so if you don't understand housing cycles you have to rely on luck.

I sold my duplex there (Lehigh Acres) about 2019 and 1031'ed it.  Made out well and never looked back ! Quality tenants are a hit and miss. Renting demand is also very seasonal.

I would sell and move on. Its the one property that i have never regretting selling.

Adrian Clapp · Answer

I agree.  One big storm and your HOA and insurance costs will go up a lot.  Sell if possible.

Condo Connundrum in Fort Myers - Sell and Eat Loss Now, Rent or Try Owner Financing ?

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