Advice on keeping or renting my condo

Member since 2018 · 2 posts · 0 votes

Hello! I'm looking for convincing reasons why I should rent or sell my current condo I live in (which I own completely) once I move out to the new house I just purchased

The new house (in Queens, NY) is worth 650k. The current condo i live in is valued at about 475k. I'm able to put down exactly 20% in down payment for the new house purchase.

Is it a better overall strategy to keep/rent out the condo which is expected to net me a yearly profit of about 11k after taxes and HOA common charges and simply take out a 520k a mortgage loan for the new house ?

or is it better to sell my condo and use the funds from the sale for the new house?

I calculated the amount of interest payments i'd pay the lender for the first year alone and it amounts to about 22k. This is obviously way more than the 11k i'd be getting from my condo rental income.

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Jason LeePro Member

Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes

Depending on how long you've owned the condo, and how much it's appreciated, you could sell it now without having to pay any capital gains on the appreciation. My guess is that savings could probably be worth a few years of rental income? If you put that equity into your new house you could pay off the loan faster or have a much lower monthly housing expense, and you can take out a Heloc to invest with. Many parts of Queens are still appreciating so there could be some upside to hanging on, but interest rate hikes and the limit on SALT deductions will have a negative impact on housing prices (it's already started to in Manhattan). You have an opportunity to sell at or very close to what is probably a peak in prices. I would take advantage of that.

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Jason LeePro Member
Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
8y
Depending on how long you've owned the condo, and how much it's appreciated, you could sell it now without having to pay any capital gains on the appreciation. My guess is that savings could probably be worth a few years of rental income? If you put that equity into your new house you could pay off the loan faster or have a much lower monthly housing expense, and you can take out a Heloc to invest with. Many parts of Queens are still appreciating so there could be some upside to hanging on, but interest rate hikes and the limit on SALT deductions will have a negative impact on housing prices (it's already started to in Manhattan). You have an opportunity to sell at or very close to what is probably a peak in prices. I would take advantage of that.
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Adrian Ruark
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Member since 2018 · 2 posts · 0 votes
8y
Thanks Jason for your reply! We've lived in our current condo for 8 years so I don't think we'll pay any capital gains on the appreciation. It's interesting what you said about the real estate appreciation in Queens slowing down a bit due to the raise in interest rates. It's something I'd definitely put a good deal of stock on when making my decision.
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Jason LeePro Member
Real Estate Agent · New York, NY · Member since 2015 · 401 posts · 235 votes
8y
Anything that negatively affects affordability will have an impact on prices. Higher rates (they can only go higher), and the new limits on deductibility of state, local, and real estate tax, will make it more expensive to own. That typically affects the entry price point (your condo's price point) the most.
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Clayton MobleyPro Member
Birmingham, AL · Member since 2014 · 875 posts · 947 votes
8y
@Adrian Ruark I'm not usually one to tell people to get rid of a free-and-clear property, but I agree with @Jason Lee - the tax advantages of selling now are huge. He also makes a great point about interest rates, they're only going higher. You're likely very near the top of this cycle, and that money could be put to work elsewhere.
I do like Jason's idea of putting it toward the house and using a HELOC to access the equity. Although, if you have the 20% you need already and you're prepared to make payments, you could always use the proceeds from the condo sale to invest in less pricey markets and skip the HELOC process.
Assuming you used the whole 475k, you could have a nice little portfolio of cash flow props in Birmingham (and other Midwest/Southeast markets). If you were ok with taking on additional debt (loans your tenants would pay down for you over time), you could potentially leverage that 475k into 10 or more cash flow properties (though there are limits on how many loans you can carry at once).
Of course, there's always a middle ground too: sell the condo, use some of the money to increase your DP on the new house and use the rest for investing. With no loan on the condo and no capital gains tax due, you're sitting quite pretty.
You've got a few good options here, but unless the condo is going to rent for way more than 1%, that capital could likely be earning you more elsewhere.
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