Request opinions and direction on whether to sell or rent out my condo

Realtor and Investor · Leawood, KS · Member since 2015 · 166 posts · 78 votes

3y

@Jose Lucina thanks for the question. It might be helpful to look at this from a worst case scenario and then make up your mind.

What happens if the real estate prices comes down in 3 years, you've held onto the property and you need to refinance it? And interet rates went up...they're not 7% anymore, they're 9%. (No one knows where rates will be in 3 years, just taking a wild guess). Also, you've rented it to three years to someone who abused the property and so it's not in good condition anymore. Your cashflow of $750/mo x 36 months = $27,000 is a drop in the bucket to the money you could lose if rates go up and the market dips and a tenant has a field day in your property.

If you're as risk averse as you seem in your post, I'd sell it and move to the next property.

P.S. - An additional risk factor with condos is the prospect of them becoming non-warrantable due things like a pending lawsuit against the association, or a high % of rentals in the building. This makes financing tougher for prospective buyers and results in a loss in value. If you have questions bout this, DM and we can have a call about it. Also, what happens if there is an assessment? What happens if the condo fees are raised? Those things can not only eat away your cashflow while you're renting it, but could scare off buyers if you're going to sell it to someone.

Good luck, message me if you'd like to discuss further by DM or phone.

2 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Jose Lucina:

Hi BP friends,

I am having some problems trying to identify whether to sell or keep my condo and would appreciate your expert help. I originally planned for keeping this condo as a college fund or downpayment house for my daughter. However, I am unsure if this will be possible and financially responsible in my circumstance.

Condo Description-; 2 bedroom, 1 bath, 2 parking spaces in an area that is in demand, an area that does not have capacity for any new developments or construction (cannot expand), is within 12 miles of three military bases, and in close proximity to a college campus. Easily rentable.

Sell Option:

Current Loan Balance- $355k

Sell- $540k

Expected Earnings (- excrow, costs, and realtor fees) = $145k.

Rent Option:

Current monthly payment (including maintenance fee, insurance) - $1150/month.

Rental expected (based off other spots in my building) - $2150/month

Cashflow expected: $700-750/month

Complicator : My loan is not a mortgage; it is a simple interest loan at 2.25% which expires in 3 years. After that, the rate would change to whatever the market rate is or I would need to refinance the property. I calculated a refinance at 7% interest + maintenance fee + insurance that my monthly payment would then turn to $2800. Which is more than I could charge for rent in this unit at this complex.

Pending forecast for inflation and for the market in three years, would I be stupid in trying to hold this property as a rental for three years and then selling it? After all expenses and fixed debts (with our new inflated home purchase) my wife and I only put away $1000 a month. Would it be better for us to sell this condo and hold the money to reinvest somewhere else?

Thank you for your help and suggestion. I'm really stuck in the grey on this one.

Are you in Oahu ?

it is very tricky for condo in Oahu as there're more supply these days.

Easier you can sell in 2025 when economy would be more normal shape than today or convert it into OO.

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Edward Stephens:

@Jose Lucina thanks for the question. It might be helpful to look at this from a worst case scenario and then make up your mind.

What happens if the real estate prices comes down in 3 years, you've held onto the property and you need to refinance it? And interet rates went up...they're not 7% anymore, they're 9%. (No one knows where rates will be in 3 years, just taking a wild guess). Also, you've rented it to three years to someone who abused the property and so it's not in good condition anymore. Your cashflow of $750/mo x 36 months = $27,000 is a drop in the bucket to the money you could lose if rates go up and the market dips and a tenant has a field day in your property.

If you're as risk averse as you seem in your post, I'd sell it and move to the next property.

P.S. - An additional risk factor with condos is the prospect of them becoming non-warrantable due things like a pending lawsuit against the association, or a high % of rentals in the building. This makes financing tougher for prospective buyers and results in a loss in value. If you have questions bout this, DM and we can have a call about it. Also, what happens if there is an assessment? What happens if the condo fees are raised? Those things can not only eat away your cashflow while you're renting it, but could scare off buyers if you're going to sell it to someone.

Good luck, message me if you'd like to discuss further by DM or phone.

dont worry too much on stuff like this, I closed my mortgage this week in high 4% LOL.

Mortgage rate of 9% ? only 3 percent chance it may happen as most banks would fail anyway. The dollar is already weakening and we would see lower rate next year. Home price already going up 10% in many market this month.

0 Reply

Jose Lucina

Kapolei, HI · Member since 2014 · 3 posts · 2 votes

3y

Quote from @Edward Stephens:

@Jose Lucina thanks for the question. It might be helpful to look at this from a worst case scenario and then make up your mind.

What happens if the real estate prices comes down in 3 years, you've held onto the property and you need to refinance it? And interet rates went up...they're not 7% anymore, they're 9%. (No one knows where rates will be in 3 years, just taking a wild guess). Also, you've rented it to three years to someone who abused the property and so it's not in good condition anymore. Your cashflow of $750/mo x 36 months = $27,000 is a drop in the bucket to the money you could lose if rates go up and the market dips and a tenant has a field day in your property.

If you're as risk averse as you seem in your post, I'd sell it and move to the next property.

P.S. - An additional risk factor with condos is the prospect of them becoming non-warrantable due things like a pending lawsuit against the association, or a high % of rentals in the building. This makes financing tougher for prospective buyers and results in a loss in value. If you have questions bout this, DM and we can have a call about it. Also, what happens if there is an assessment? What happens if the condo fees are raised? Those things can not only eat away your cashflow while you're renting it, but could scare off buyers if you're going to sell it to someone.

Good luck, message me if you'd like to discuss further by DM or phone.

Big mahalo for the insight, Edward. Sell is where I am leaning to as the risk reward is not favorable for keeping. Thank you for the forceful backup in logic.

0 Reply

Jose Lucina

Kapolei, HI · Member since 2014 · 3 posts · 2 votes

3y

Quote from @Carlos Ptriawan:

Quote from @Jose Lucina:

Hi BP friends,

I am having some problems trying to identify whether to sell or keep my condo and would appreciate your expert help. I originally planned for keeping this condo as a college fund or downpayment house for my daughter. However, I am unsure if this will be possible and financially responsible in my circumstance.

Condo Description-; 2 bedroom, 1 bath, 2 parking spaces in an area that is in demand, an area that does not have capacity for any new developments or construction (cannot expand), is within 12 miles of three military bases, and in close proximity to a college campus. Easily rentable.

Sell Option:

Current Loan Balance- $355k

Sell- $540k

Expected Earnings (- excrow, costs, and realtor fees) = $145k.

Rent Option:

Current monthly payment (including maintenance fee, insurance) - $1150/month.

Rental expected (based off other spots in my building) - $2150/month

Cashflow expected: $700-750/month

Complicator : My loan is not a mortgage; it is a simple interest loan at 2.25% which expires in 3 years. After that, the rate would change to whatever the market rate is or I would need to refinance the property. I calculated a refinance at 7% interest + maintenance fee + insurance that my monthly payment would then turn to $2800. Which is more than I could charge for rent in this unit at this complex.

Pending forecast for inflation and for the market in three years, would I be stupid in trying to hold this property as a rental for three years and then selling it? After all expenses and fixed debts (with our new inflated home purchase) my wife and I only put away $1000 a month. Would it be better for us to sell this condo and hold the money to reinvest somewhere else?

Thank you for your help and suggestion. I'm really stuck in the grey on this one.

Are you in Oahu ?

it is very tricky for condo in Oahu as there're more supply these days.

Easier you can sell in 2025 when economy would be more normal shape than today or convert it into OO.

Hi Carlos,

thank you for your insight. I spoke with my realtor and he laid out that in my complex three units have sold fairly quickly from January to February and in the price range I am setting for. I think in Hawaii because houses have become out of range for affordability, home buyers are shifting towards condos as they are more affordable. Specifically in my area demand continues as we have a lot of military that come in and out and favor the area.
id like to hope that holding for three years would be beneficial but I’m honestly concerned with the housing market climate and the actions of the fed

0 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Jose Lucina:

Quote from @Carlos Ptriawan:

Quote from @Jose Lucina:

Hi BP friends,

I am having some problems trying to identify whether to sell or keep my condo and would appreciate your expert help. I originally planned for keeping this condo as a college fund or downpayment house for my daughter. However, I am unsure if this will be possible and financially responsible in my circumstance.

Condo Description-; 2 bedroom, 1 bath, 2 parking spaces in an area that is in demand, an area that does not have capacity for any new developments or construction (cannot expand), is within 12 miles of three military bases, and in close proximity to a college campus. Easily rentable.

Sell Option:

Current Loan Balance- $355k

Sell- $540k

Expected Earnings (- excrow, costs, and realtor fees) = $145k.

Rent Option:

Current monthly payment (including maintenance fee, insurance) - $1150/month.

Rental expected (based off other spots in my building) - $2150/month

Cashflow expected: $700-750/month

Complicator : My loan is not a mortgage; it is a simple interest loan at 2.25% which expires in 3 years. After that, the rate would change to whatever the market rate is or I would need to refinance the property. I calculated a refinance at 7% interest + maintenance fee + insurance that my monthly payment would then turn to $2800. Which is more than I could charge for rent in this unit at this complex.

Pending forecast for inflation and for the market in three years, would I be stupid in trying to hold this property as a rental for three years and then selling it? After all expenses and fixed debts (with our new inflated home purchase) my wife and I only put away $1000 a month. Would it be better for us to sell this condo and hold the money to reinvest somewhere else?

Thank you for your help and suggestion. I'm really stuck in the grey on this one.

Are you in Oahu ?

it is very tricky for condo in Oahu as there're more supply these days.

Easier you can sell in 2025 when economy would be more normal shape than today or convert it into OO.

Hi Carlos,

thank you for your insight. I spoke with my realtor and he laid out that in my complex three units have sold fairly quickly from January to February and in the price range I am setting for. I think in Hawaii because houses have become out of range for affordability, home buyers are shifting towards condos as they are more affordable. Specifically in my area demand continues as we have a lot of military that come in and out and favor the area.
id like to hope that holding for three years would be beneficial but I’m honestly concerned with the housing market climate and the actions of the fed

housing market climate already getting much better compared to 4 months ago and Fed would not raise the rate as much as inflation already drops to 5% this week. I'm thinking of adding one condo over there.... Yes, the CA/HI market is created for OO, and not for rental, fortunately.

1 Reply

Doug Spence

Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes

3y

@Jose Lucina If you sold, how would you invest that capital? If you don't have a good answer yet, I definitely wouldn't sell. You have 3 more years to figure it out until the property turns to negative monthly cash flow, so I'd probably hang on to it at least until the 2.5-3 year mark. Odds are, it will continue to go up in value in that time, your rent will go up each month, and you'll be better off by keeping it for the time being.

Let us know what you decide!

1 Reply

Jose Lucina

OP

Member since 2022 · 2 posts · 0 votes

3y

Quote from @Doug Spence:

@Jose Lucina If you sold, how would you invest that capital? If you don't have a good answer yet, I definitely wouldn't sell. You have 3 more years to figure it out until the property turns to negative monthly cash flow, so I'd probably hang on to it at least until the 2.5-3 year mark. Odds are, it will continue to go up in value in that time, your rent will go up each month, and you'll be better off by keeping it for the time being.

Let us know what you decide!

You know I do not have any direct plans to reinvest that capital. Do you have recommendations for what and where I should look into?

0 Reply

Doug Spence

Investor · San Diego, CA · Member since 2016 · 1k+ posts · 975 votes

3y

@Jose Lucina It depends on your goals! There are lots of ways to invest in real estate, some are more active some more passive, some have higher risk but also higher returns. Do you want to invest where you live or are you comfortable with out-of-state investing?

0 Reply

Request opinions and direction on whether to sell or rent out my condo

Request opinions and direction on whether to sell or rent out my condo

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