Should I continue to sell or refinance to lower monthly & rent

Question

Hi everyone,

I currently own a Condo in downtown Chicago and have been trying to sell it with no success. I listed at 370k without parking (35k) in February as suggested by my realtor and have since lowered it to 325k without parking with a new realtor. I have learned since my purchase of the condo that it is not a great building to be in with the small space, association rules and regulations, no amenities although it is a great location in the financial district with easy access to all transportation. Work has been unstable for me and I want to take the equity and buy a better cash flowing Turnkey property in Indiana.

I am trying to figure out an alternate plan if I am unable to sell. I had refinanced last year to a 15year 2.75% which makes my monthly including HOA of 475 at about 3k. Since work is unstable I am uncomfortable with the negative cash flow I would be acquiring if I decide to rent it out for market value of 2300-2400k. If I refinance back to a 30 year 3.8% which I was quoted, my payments would lower to just under 2500. I will lessen how much I could be under and cash out 21k I can use for another property.

Or should I just lower my price for sale even more and just cut my losses?

This is my first post and would love any/all suggestions I could get!

Thanks so much,

Hope

Hope Louisse Montenegro · Answer

Hi everyone,

Just wanted to thank you all for your advice and let you know that I'm scheduled to close on the property this 10/6/2017. I am relieved and excited to move on and be able to purchase smarter cash-flowing properties !

Thank you again for helping me make the decision!

Jonathan Klemm · Answer

@Hope Louisse Montenegro - I would definitely sell and get out of it.  If you are unsure about your work, then even all the more reason too since the mortgage is so high.  Northwest Indiana is a great place to find some investment property at a fraction of the cost of Chicago.  I know a fantastic realtor, if this next one doesn't work out.  Shoot me a PM and ill give you her name, she is the best.

Steve Cunningham · Answer

Bad buying decisions just suck-but it's all a learning experience. Bought a property in Colorado for $300K, lived there for 10 years, and sold it for $300K. Took the left over money, bought a foreclosure in Oregon, and made $200K on paper. Will be refinancing this next summer to buy another 4 plex. Bitter turned to sweet. Happens. Good Luck.

Rick Baggenstoss · Answer

Get your license.  Sell it yourself and get another stream of income as an agent.

Dhru Das · Answer

@Hope Louisse Montenegro since your condo is in good location, have you thought about AirBnB? I would think that will bring you more money to cover all your expense including HOA and give you strength to hold it for sometime until you decide to sell...Just a suggestion.

Dooreuhn Cee · Answer

the condo will eventually go up in value, but land lording for negative cash flow along the way is no fun.

Clayton Mobley · Answer

@Hope Louisse Montenegro y'know, given that Chicago isn't my market, I'd defer to your agent on that. They're going to be the most incentivized to get your property sold (second to you, of course) so they will know what needs to be done to get it off the market. People do like to be moved and settled by the time the school year rolls around, so you're likely coming up on the end of the hotter sales season, but I'd talk with your agent. Since the contract is up in October, they are going to be highly motivated to sell before then anyway.

Given your negative cash flow situation, I'd say consider reducing the price a bit to sell earlier rather than losing more money. If you take it off the market now and wait six months, that's six more months of paying on your mortgage, six more months of losing money to the HOA. Taking less than your current asking price to sell now (as long as you still get more than your loan amount) would be the better bet from my perspective. If you wait till spring to put it back on the market, you're going to pay another $18k in PITI and HOA minimum before it even goes back up (so likely more assuming it doesn't sell on Day 1), so if you can reduce the price by $18k or less now to move it quickly, then you'll end up as ahead as you're going to be.

Again, defer to someone who knows more about your market. But my general opinion is that unloading this sooner rather than later will net you a lesser loss.

Best of luck!

Clayton

Hope Louisse Montenegro · Answer

@Clayton Mobley Thank you so much! I am honestly so grateful there are people out there who are willing to take the time and help out a stranger. I am definitely going to proceed with a sale but since the markets are cooling off and I have been listed longest in the building, do you think I should take myself off and list again in the Spring? My agent contract ends mid October.

Clayton Mobley · Answer

@Hope Louisse Montenegro I'm seconding the sentiment here - get out while you can, cut your losses and move on. I am never a fan of anything with an HOA fee - and all those rules make maintenance costs higher in general as well. You're getting a negative return, and if work is unstable, this is costing you money and cortisol lol - the stress from having this loom over you during a time of financial uncertainty can't be great. If your loan is 275k, you don't have a lot of room to pull out equity anyway, and the difference a refi would make wouldn't really be worth the fees. If you can get out with more than your loan amount, fantastic. Count the loss as part of the learning process - that's a sunk cost anyway at this point, the opportunity cost of paying on this property while getting nothing in return is what you have to be concerned about. So get out sooner rather than later and take this lesson forward into new investments.

@Jonathan Klemm makes a great point - there are so many markets that are cheaper than Chicago for cash flow properties. In addition to lower sales prices, Chicago has some pretty high property tax rates, so you could definitely be losing less to taxes (not to mention ditching those HOA fees) in another market.

This is the site I used to compare tax rates, if that's helpful to you. You can just change the location/city/state/zip to any market you're considering:

https://smartasset.com/taxes/alabama-property-tax-...

Best of luck!

Clayton

Hope Louisse Montenegro · Answer

Thank you for the response! Indiana is definitely where I want to go for my investment purchases and already have some Turnkey Companies in mind.

Should I continue to sell or refinance to lower monthly & rent

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