Sell or rent my condo

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sailor234
Posts: 324
Joined: Tue Nov 20, 2007 6:47 am
Location: Lehigh Valley, PA

Sell or rent my condo

Post by sailor234 »

Here in PA I've bought a new home and have my active adult condo up for sale. No surprise, it's a very slow market and no offers yet. I've also listed it for rent and have several contacts, one of which wanted to rent long term, five years or more. (He is 71 and doesn't want to move again.)

So renting seems an easier path forward than selling. It's a condo so all the outside maintenance is taken care of. I've owned rental units in the past and had no problems managing them, plus I'll be five minutes away and can easily take care of minor problems.

My preference would be to sell but, if that means waiting three-six months or longer and watching it slowly decline in value, it might be better to make it a business: get it appraised, rent it out, depreciate it and take tax losses when I sell it.

Your thoughts?

Ray
The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. George Bernard Shaw
clevername
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Location: FL

Post by clevername »

Don't underestimate the complexity of renting. Keep in mind that once you move and it is no longer your primary residence your tax rate might go up. Also cutting into income are extra insurance, realtor costs and lawyers. You can also expect it to be empty now and then not earning income and costing money in insurance taxes HOA etc. It's a very personal decision based on a ton of variables, YMMV.
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cheese_breath
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Post by cheese_breath »

Will your condo association allow you to rent it?
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sailor234
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Location: Lehigh Valley, PA

Post by sailor234 »

cheese_breath wrote:Will your condo association allow you to rent it?
Yes; there are no restrictions (yet) on rentals. The complex is still under construction, about 70% built and sold, with the builder occasionally renting an unsold unit. At current sales rates, the complex will take 3-4 years to complete. Changing the bylaws to limit rentals would require builder concurrence, which doesn't seem likely for the immediate future.


To clevername - I have owned rental condos in the past, three at once for a few years. It was a bit busy/annoying at times but I was working then and the units were not nearby to address the occasional problem. In this case, I am retired with time to address problems and the unit is a quarter mile away. Of course my preference would be to sell it and get the use of my capital but not at a great loss. It's currently listed at about $80K LESS than I've spent overall; I won't sell at more than a 25% discount, a loss of about $100K.

PS: The new home was a short sale; I got it at 56% of the original sale price in 2006.

Ray
The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. George Bernard Shaw
john94549
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Post by john94549 »

If you have the prior experience with rentals (a major plus; you'd be amazed how many folks have never heard of "depreciation recapture"), the time (another plus; our management company takes 38% of gross rentals), and the prospect of a long-term lease (I can only say "wow!"), it's a no-brainer.

Consider yourself a landlord again.

Good luck.

Don't forget to keep your MAGI below $150K (an inside joke). I so love Form 1040, line 17, when the dollar amount has a minus sign in front of it.
wander
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Re: Sell or rent my condo

Post by wander »

sailor234 wrote: So renting seems an easier path forward than selling. It's a condo so all the outside maintenance is taken care of. I've owned rental units in the past and had no problems managing them, plus I'll be five minutes away and can easily take care of minor problems.
Ray
It's a good idea to rent it out. You won't have to worry about the condo for at least the next 5 years, and it generates extra steady income for you.
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sailor234
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Location: Lehigh Valley, PA

Re: Sell or rent my condo

Post by sailor234 »

Thanks to all for the comments and suggestions.

I've now rented the condo to a retired couple who want to be near their grandkids. Overall a rather easy process although I was competing with the builder, who rents out finished units that have not sold.

My capital in the unit is debatable since no one offered to buy it but, using reasonable estimates, I will clear about 3% on the rent AFTER paying all expenses, and that does not include deductions for taxes, etc. My gamble is that the builder will be finished and gone in 2-3 years, no longer a competitor, and the completed project will be more attractive, causing prices to firm or even increase with only re-sales available.

Ray
The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. George Bernard Shaw
ilmartello
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Re: Sell or rent my condo

Post by ilmartello »

I hope when you calculated your costs and determined 3 percent,
you included the mortgage payments, condo association fees, property taxes, and a reasonable amount set aside for repair.
Oh and you need insurance even with a condo for fire or other risks, it's just called an ho-6 policy and covers the interior. You will need to disclose f the unit is a rental
Topic Author
sailor234
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Location: Lehigh Valley, PA

Re: Sell or rent my condo

Post by sailor234 »

ilmartello » Wed Dec 28, 2011 6:14 pm
"I hope when you calculated your costs and determined 3 percent, you included the mortgage payments, condo association fees, property taxes, and a reasonable amount set aside for repair. Oh and you need insurance even with a condo for fire or other risks, it's just called an ho-6 policy and covers the interior. You will need to disclose f the unit is a rental"

Thanks, yes, I've included all of the costs of ownership and maintenance. All of that is captured in my spread sheet, which also kicks out the relevant information for tax purposes and the rate-of-return. Actually, the guestimate of 3% does not include tax deductions for property taxes, association fees, insurance and maintenance costs; my actual return will be a bit higher.

In the past I've owned several rental properties, which I sold off after retiring; didn't want to rent this one but had no options while the builder is aggressively pricing new units.

Ray
The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. George Bernard Shaw
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FelixTheCat
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Re:

Post by FelixTheCat »

john94549 wrote:our management company takes 38% of gross rentals
I have a rental property. The management company I employ takes 10% of gross. It's standard in Southern Cali.

The second best thing about a rental is you get to write off EVERYTHING! The first best is the check that I will continue to receive for many years to come. :D
Felix is a wonderful, wonderful cat.
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