Help! Should I sell, refinance or Struggle it out?

Question

Owned a condo since 2007, depreciation set in after the housing crash, it took me 8 years to break even on my balance. I now have 6.8 years left as the contractual remaining term. The recovery is extremely slow, if not non-existent. I made a vow to myself to sell it no later than this year. I have hated this property for a while. However...

I recently found out that the rent rates have gone way up in my neighborhood, and that I'm finally able to refinance since I repaired my credit.

I did the math and after HOA dues of $120 (and threatening to be bumped up to $145-$160 soon), and the rate dropped from 6.5% to 3.65% I'd make a monthly rental income of anywhere from $130-$170.

Quick refi stats:

15 year term
3.65%
$1100 down payment on the remaining balance of $31,900

I've already had a real estate agent working on putting it on the market, but told her to hold on a minute. I feel bad keeping her waiting while I'm trying to make the biggest decision of my life.

I would love to have some positive cash flow for once in my life from this property. I've never experienced that before. I could probably go rent something that is not in a slum for once.

But having experienced having different types of renters throughout the years I have seen all sorts of problems, including water seeping in from a busted water heater from the third floor (I own a 1st floor unit). I'm worried about the potential disasters that are out of my control and possible expensive repairs knocking any monthly cashflow I might get out the window.

Should I just sell it and get rid of this curse once and for all?

There's a third option.... if I was to struggle it out and pay around $400 extra towards principal for 3.5 years that would give me the best profit obviously. In that case I would make a $400 monthly cashflow instead of $~150 monthly cashflow.

If I was to go this route, I'd probably get a roommate to help with bills at least. I've already had two jobs in the recent past and that is a lifestyle I have more or less denounced.

Here's the short version of all that:

Option one:

Refinance now and make anywhere from $130 to $170 a month, depending on HOA fees

Option two:

Sell and go look for other properties if I have to be a real estate investor

Option three:

Struggle it out, maybe get a roommate to help with bills, live like no one else for around 3-4 years so that I can live like no one else til the end of time

Your help is much appreciated.

Account Closed · Answer

I'd get rid of it. HOAs are an unknown cost, as you have learned. With the margin you have over your costs, you'll be losing money. Get rid of it and swear off HOAs, is my advice.I had a condo in a very desirable college town and I let it go because of the HOA. Really, if there's any way you can invest in something without the HOA unknowns and weirdo rule nazis, do that instead.

Jeff F. · Answer

if I were you, I'd go with option 3. You can increase your rents when you are next able, get a roommate and make some serious progress on the note.Another question - why are you doing a refi at 15 years instead of 30?

Almir Alic · Answer

Ok. It's pretty clear now what my best option is. Thank you all.Ayodeji, yes, passive income is my goal. There are better investments out there.

Ayodeji Kuponiyi · Answer

@Almir Alic Personally, I'd sell & start over and apply the lessons I learned moving forward. What is your goal? Passive income? If so, look into a multifamily. Pick a niche. Best of luck.

Thomas S. · Answer

Sell. Dreaming of better days does not pay the bills. In addition paying off the principal with your own money increases your profit by Zero. If the market takes a turn you simply lose more.Sell, Sell, Sell and get some sleep at night you need a break.

Almir Alic · Answer

I put it up for sale already a few weeks ago and the buyer now has due diligence til June 2nd. (a new term for me) The HOA fees have gone up from $120 to $160. I'm sick and tired of their BS ...they went up that high because of "high water bills"You just never know how much you'll keep getting screwed over by them over the years which is why I won't do option 3.To answer your question of why refi at 15 instead of 30, in short, it's because I'm a Dave Ramsey follower. www.daveramsey.com

Almir Alic · Answer

I left out an important piece of information here.These condos have been section 8-approved for some time. I just don't know how long ago they started it.There's no doubt that section 8 approval has something to do with the depreciation. I talked to a co-worker and she told me I should try to have the city buy my unit from me. The housing authority.Does anyone know if this is a legit way to handle things? I had to ask because These condos have been going for ~ $37,000 at best around here, I bought at $63,000 in '07.Thanks.

Almir Alic · Answer

Whoa! I just noticed that I hadn't even mentioned the "special assessment fees" by the HOA. It's usually a lump sum of $300 usually around every third year, for some kind of repairs...

Almir Alic · Answer

Cool, thanks for your input.