Time to sell our condo? Advice needed.

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Cottons
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Time to sell our condo? Advice needed.

Post by Cottons » Tue Oct 30, 2018 7:24 pm

Since I'm not sure the best format for this, I'm going to throw a bunch of figures out there. Please let me know if you need additional information in order to make a good recommendation. Part of my fear is that if something sounds too good to be true, it probably is. So I'm really looking for y'all to poke some holes in this plan (if you can)

Live in Chicago, but not one of the expensive neighborhoods
Current Cash: $24,500 (approx 5 months expenses)
Current investments: $118,500
Both humans are age 31
Monthly net take home: ~6,000

Current debt:
total student loans: $27,000. 1 person's loans will be paid off in February. We will snowball that money into my spouse's loans. Almost all of these are at 6.5% fixed.
Mortgage: $118,000 @ 3.5% fixed
Vehicle: $18,500

Monthly debt payments
Mortgage: $1,250
HOA (ugh, I know): $340
Student loans: $1,200
Car: $370
Parking: $100

The game plan
Part of my family's 5 year plan is to move out of IL, and to purchase a home. With real estate prices rising, part of this discussion has been driven by FOMO. Come time to move, we don't want to be sitting on devalued property. The misses and I are considering selling, using the proceeds to pay off all debt, saving the remaining cash. Using conservative estimates of a $225,000 selling price, we are looking at remaining cash of approximately $50,000 after paying off debt, realtor's fees, and home improvements prior to sale.

With monthly cash freed up from eliminating debt payments, we are looking at the following monthly amounts:
Income: $6,000
Rent: ~2,000
Average monthly expenses since 2014 (including utilities, groceries, vacations, dining out etc etc): ~$1,650
This leaves us with ~ $2,350/month cash for saving, investing, living, and eventually moving out of IL.


So in summary, if you were in our shoes, would you sell the condo?

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leeks
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Re: Time to sell our condo? Advice needed.

Post by leeks » Tue Oct 30, 2018 7:33 pm

To confirm, you are considering selling your current place and renting in the same area until you are ready to relocate to another state? Would you be getting something you like better if you move to a rental (better location or more space/better layout)?

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Cottons
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Re: Time to sell our condo? Advice needed.

Post by Cottons » Tue Oct 30, 2018 7:50 pm

Yes, we would rent in the same area for the time being until we are ready to leave the state.

Goal33
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Re: Time to sell our condo? Advice needed.

Post by Goal33 » Tue Oct 30, 2018 7:54 pm

Sounds like a lot of work. I'd stay until I was ready to move.
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bob60014
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Re: Time to sell our condo? Advice needed.

Post by bob60014 » Tue Oct 30, 2018 9:10 pm

What neighborhood are you in now? Depending on the neighborhood, a move now may not be in your best interest.. Lincoln Pk, Lakeview, Wrigleyville etc, are stable and staying put might be recommended. Albany Pk, Belmont Cragin, Austin etc, maybe not.

SoAnyway
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Re: Time to sell our condo? Advice needed.

Post by SoAnyway » Tue Oct 30, 2018 11:04 pm

I faced a similar situation about 12 years ago, OP. I sold my condo in 2006 that I'd bought five years earlier. Had I not sold then, after the financial crisis I'd have been "stuck" for about 7-8 years because local RE values sunk like a rock (~40-50% drop seemingly overnight). In that sense, I get the "FOMO" bit, although my timing was serendipitous rather than prescient. IOW, it's only in hindsight that I realize I got lucky. The difference in my case was that I got a new job further out and I didn't love being a homeowner or part of a HOA, so I sold and my new rental wasn't in the same area. SoAnyway....

As you know all RE markets are local. I'll leave it to Bob60014 and other "600XXs" to give more specific advice. I'd lean heavily toward staying put, barring contrary advice from those more in the know re. your local area. Moving's a huge hassle/disruption and there are always additional transition costs, e.g. moving costs, new purchases because the old stuff doesn't look right/fit right in the new place, etc. etc. I'm a bit surprised that your rent would be $2K/mo. in the same neighborhood given your estimated condo selling price. That is, your current monthly housing costs are $1590 + utilities; rent would be $2K/mo. Does the latter include utilities/pkg./same square footage/etc.? IOW, are you comparing apples to apples? If you do decide to sell, are there ways to economize on the rent? (e.g. less sf, fewer amenities, etc.)

You didn't ask but there appears to be another avenue of opportunity in your post. What's up with the vehicle-related costs? Have you considered selling the car and paying cash for a reliable used? That would free up $370/mo. Also is the $100 monthly parking cost for parking at home or at work?

BTW: Good on you and your DW for having a plan and working diligently toward it, getting the debt monkey off your backs, etc.!
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Cottons
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Re: Time to sell our condo? Advice needed.

Post by Cottons » Wed Oct 31, 2018 9:24 am

SoAnyway wrote:
Tue Oct 30, 2018 11:04 pm
I'd lean heavily toward staying put, barring contrary advice from those more in the know re. your local area. Moving's a huge hassle/disruption and there are always additional transition costs, e.g. moving costs, new purchases because the old stuff doesn't look right/fit right in the new place, etc.
Yes, moving is a hassle no doubt. I get your point, but moving costs have already been factored in. In regards to new purchases: we are pretty frugal people so a purchase based on how something feels/fits is out of the question. We are much more function over fashion. Right now we are both ~5 miles from work, so staying in or near our current location is a must.
SoAnyway wrote:
Tue Oct 30, 2018 11:04 pm
etc. I'm a bit surprised that your rent would be $2K/mo. in the same neighborhood given your estimated condo selling price. That is, your current monthly housing costs are $1590 + utilities; rent would be $2K/mo. Does the latter include utilities/pkg./same square footage/etc.? IOW, are you comparing apples to apples? If you do decide to sell, are there ways to economize on the rent? (e.g. less sf, fewer amenities, etc.)
For the most part we are looking at rental options that are similar to our place in terms of amenities, beds/baths, sq. feet. And in some instances we are looking at smaller apartments. Good point on utilities, so total rent + utilities would be closer to ~2,100 - ~$2,150. Some rentals include heat / internet. We cut the cable cord years ago so that isn't a cost for us.
SoAnyway wrote:
Tue Oct 30, 2018 11:04 pm
You didn't ask but there appears to be another avenue of opportunity in your post. What's up with the vehicle-related costs? Have you considered selling the car and paying cash for a reliable used? That would free up $370/mo. Also is the $100 monthly parking cost for parking at home or at work?
This is a new vehicle purchase after our old Chevy Cobalt took a crap. Selling is not an option as family lives out of state, and reliable transportation is needed.

daheld
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Re: Time to sell our condo? Advice needed.

Post by daheld » Wed Oct 31, 2018 9:28 am

When will you be ready to move away from IL?

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Cottons
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Re: Time to sell our condo? Advice needed.

Post by Cottons » Wed Oct 31, 2018 9:41 am

Anywhere from 3-5 years from now.

euroswiss
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Re: Time to sell our condo? Advice needed.

Post by euroswiss » Wed Oct 31, 2018 10:04 am

When doing your math make sure you include closing costs (mostly carried by the seller). If you do sell for $225000 then you actually collect closer to $205000 (before subtracting mortgage). So you may not be left with 50K. Just double-check.

Edit: never mind - looks like you already accounted for that... although if you allow a few grand for pre-sale repairs, it still doesn't seem you get to 50K. So: 225K-20K (closing)-5K (repairs) - 118.5K (mortgage) - 27K (student loans) - 18.5K (car) = 36K

Personally, I would tend to stay put

katrid11
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Re: Time to sell our condo? Advice needed.

Post by katrid11 » Wed Oct 31, 2018 10:16 am

I still think the car is a valid option. Reliable transportation does not mean a new car with $370 car payment.

A 3-4 yr old car is just as reliable and has less depreciation. Also renting a car is a better option if you want to avoid car ownership.

A car is a much more liquid asset to handle. You could swap out cars this Saturday and have $0 or $150 car payment.

As for selling the condo - If you had a more strict timeframe - like we want to move in 2 years, then sure, sell it, pay off all of the debt but I'd go even cheaper on rent. See if you can't survive in a small 1bed or a large studio for the a year or so - get rent under $1800 and use the difference to save for that downpayment.

daheld
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Re: Time to sell our condo? Advice needed.

Post by daheld » Wed Oct 31, 2018 10:43 am

euroswiss wrote:
Wed Oct 31, 2018 10:04 am
When doing your math make sure you include closing costs (mostly carried by the seller). If you do sell for $225000 then you actually collect closer to $205000 (before subtracting mortgage). So you may not be left with 50K. Just double-check.

Edit: never mind - looks like you already accounted for that... although if you allow a few grand for pre-sale repairs, it still doesn't seem you get to 50K. So: 225K-20K (closing)-5K (repairs) - 118.5K (mortgage) - 27K (student loans) - 18.5K (car) = 36K

Personally, I would tend to stay put
I can't make the math work either. I get the tendency to want to capitalize when you can make the money and it's not the worst idea, but for me personally, it would be too big of a hassle to move twice in a few years. You might sell your condo in 3 years and just break even, or you might make even more money. Only you can decide what the best course of action is.

lifeisinmirrors
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Re: Time to sell our condo? Advice needed.

Post by lifeisinmirrors » Wed Oct 31, 2018 11:01 am

I don't see any financial reason to do that. You'd be paying more for housing and not building equity. Your debts will be paid off soon enough anyway.

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Watty
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Re: Time to sell our condo? Advice needed.

Post by Watty » Wed Oct 31, 2018 12:57 pm

Cottons wrote:
Tue Oct 30, 2018 7:24 pm
The game plan
Part of my family's 5 year plan is to move out of IL, and to purchase a home. .....
Why wait five years to move?

You could start looking for jobs in the area you want to move to now then move when you find jobs.

One huge advantage of selling while the local housing market is strong is that you can usually sell a property fairly quickly once you are ready to move. If you wait a few years to sell the condo then you could end up trying to sell it in a slow housing market and it can take a very long time sell a property.

In most areas the unemployment rate is low now too which could make finding new jobs easier. That could also be different in five years.

If you rent another property where you are at now then you would likely have to sign a yearly lease which will make eventually moving more complicated.

onourway
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Re: Time to sell our condo? Advice needed.

Post by onourway » Wed Oct 31, 2018 1:03 pm

I would not sell now only to rent in the same area for more money with only a vague plan of moving in the 3-5 year timespan.

Yes, there is a relatively small possibility that there could be another 2008-type housing crash that could force you to sell at a loss (or simply stay put for a few more years). The more likely outcome is that you'll have continued to build equity and your property will at least hold value if not appreciate a small amount and you'll have a lot more money than if you'd rented the more expensive place and been subject to yearly rent increases.

michaeljc70
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Re: Time to sell our condo? Advice needed.

Post by michaeljc70 » Wed Oct 31, 2018 1:13 pm

I would wait. Of course, it could be that prices plummet and selling now would have been better, but we cannot know that. Assuming the place you are selling and the place you are buying are not drastically different in price, any rise/fall in the market would be a wash.

I have some anecdotal information from Chicago. A realtor friend says things have really slowed in the last 6 months. Another friend trying to sell his condo (River North) cannot get any showings even with the price being $50k less than the last sale for the same unit (around 2 years ago).

Cycle
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Re: Time to sell our condo? Advice needed.

Post by Cycle » Wed Oct 31, 2018 1:19 pm

Your HOA seams reasonable to me. You probably get things in exchange for that fee.

Sfh owners are constantly dumping money into their properties for "upgrades" or repairs. Brake those down to monthly numbers and your HOA fee likely will look like a bargain.

I used to despise my $300 HOA, but now that I own a duplex and do my own books, I see that fee was exceptionally reasonable.

In a heartbeat I would exchange my position as landlord with my tennants. I've got tons of equity (no mortgage) tied up in my property. All I get in exchange is 70% net saver bragging rights.
Never look back unless you are planning to go that way

michaeljc70
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Re: Time to sell our condo? Advice needed.

Post by michaeljc70 » Wed Oct 31, 2018 1:39 pm

Cycle wrote:
Wed Oct 31, 2018 1:19 pm
Your HOA seams reasonable to me. You probably get things in exchange for that fee.

Sfh owners are constantly dumping money into their properties for "upgrades" or repairs. Brake those down to monthly numbers and your HOA fee likely will look like a bargain.

I used to despise my $300 HOA, but now that I own a duplex and do my own books, I see that fee was exceptionally reasonable.

In a heartbeat I would exchange my position as landlord with my tennants. I've got tons of equity (no mortgage) tied up in my property. All I get in exchange is 70% net saver bragging rights.
I think the HOA fee might be good, but without knowing the type of property and what's included it is hard to say. The difference between a HOA and not having one is that if you own your own home you can choose to do things yourself. Most people cut their own grass and pick the trash up off the lawn. With an HOA, you typically don't have that option and everything is hired out. You might also be paying for amenities you don't need/use like pools, workout rooms and doormen. Doormen here (Chicago) really add to the HOA costs.

I pay $150/mo for a townhouse HOA and that includes garbage service, a guy that cleans the mail room, sidewalks and rest of the property (limited as it is in a dense urban area), lawn service (again, very limited areas), a property mgmt company, plowing of snow from driveways in the winter, common area insurance and $$$ for capital replacements in the common areas. I consider it a good deal.

rascott
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Re: Time to sell our condo? Advice needed.

Post by rascott » Wed Oct 31, 2018 2:00 pm

Cottons wrote:
Tue Oct 30, 2018 7:24 pm
Since I'm not sure the best format for this, I'm going to throw a bunch of figures out there. Please let me know if you need additional information in order to make a good recommendation. Part of my fear is that if something sounds too good to be true, it probably is. So I'm really looking for y'all to poke some holes in this plan (if you can)

Live in Chicago, but not one of the expensive neighborhoods
Current Cash: $24,500 (approx 5 months expenses)
Current investments: $118,500
Both humans are age 31
Monthly net take home: ~6,000

Current debt:
total student loans: $27,000. 1 person's loans will be paid off in February. We will snowball that money into my spouse's loans. Almost all of these are at 6.5% fixed.
Mortgage: $118,000 @ 3.5% fixed
Vehicle: $18,500

Monthly debt payments
Mortgage: $1,250
HOA (ugh, I know): $340
Student loans: $1,200
Car: $370
Parking: $100

The game plan
Part of my family's 5 year plan is to move out of IL, and to purchase a home. With real estate prices rising, part of this discussion has been driven by FOMO. Come time to move, we don't want to be sitting on devalued property. The misses and I are considering selling, using the proceeds to pay off all debt, saving the remaining cash. Using conservative estimates of a $225,000 selling price, we are looking at remaining cash of approximately $50,000 after paying off debt, realtor's fees, and home improvements prior to sale.

With monthly cash freed up from eliminating debt payments, we are looking at the following monthly amounts:
Income: $6,000
Rent: ~2,000
Average monthly expenses since 2014 (including utilities, groceries, vacations, dining out etc etc): ~$1,650
This leaves us with ~ $2,350/month cash for saving, investing, living, and eventually moving out of IL.


So in summary, if you were in our shoes, would you sell the condo?

In your shoes....no I would not sell it whatsoever. Unless you think the neighborhood is really deteriorating for some reason. Not a wise financial move, all things equal.

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djpeteski
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Re: Time to sell our condo? Advice needed.

Post by djpeteski » Wed Oct 31, 2018 2:09 pm

The car alone is killing you. Can you sell the car and do without, occasionally renting? If not can you get a more reasonable car?

As far as selling the house it is not a bad idea and a decent strategy to get out of debt. It makes it especially good if you think the market will turn down prior to you two being ready to move.

What is holding you back from moving now? Or moving within the lease term from when you sell the condo?

sawdust60
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Re: Time to sell our condo? Advice needed.

Post by sawdust60 » Thu Nov 01, 2018 12:58 am

onourway wrote:
Wed Oct 31, 2018 1:03 pm
I would not sell now only to rent in the same area for more money with only a vague plan of moving in the 3-5 year timespan.

Yes, there is a relatively small possibility that there could be another 2008-type housing crash that could force you to sell at a loss (or simply stay put for a few more years). The more likely outcome is that you'll have continued to build equity and your property will at least hold value if not appreciate a small amount and you'll have a lot more money than if you'd rented the more expensive place and been subject to yearly rent increases.
I wondered what the numbers would look like in 5 years.

Stay, and continue to pay down mortgage, car, student debt -- maintaining total monthly payment of $2820 results in minimal mortgage balance.
i.e., $100K+ in equity.

OR -- start renting

$1,700/month higher expenses (rent less HOA) x 60 months = $102K higher expense
and increase in savings: $40K+

-- and all rough numbers, but you get the idea how much of a difference it is when your money is going out as an expense vs. building equity.

Another alternative is to use part of your savings to pay-off or pay-down debt, and then rebuild savings.

Valuethinker
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Re: Time to sell our condo? Advice needed.

Post by Valuethinker » Thu Nov 01, 2018 5:52 am

Cottons wrote:
Tue Oct 30, 2018 7:24 pm
Since I'm not sure the best format for this, I'm going to throw a bunch of figures out there. Please let me know if you need additional information in order to make a good recommendation. Part of my fear is that if something sounds too good to be true, it probably is. So I'm really looking for y'all to poke some holes in this plan (if you can)

Live in Chicago, but not one of the expensive neighborhoods
Current Cash: $24,500 (approx 5 months expenses)
Current investments: $118,500
Both humans are age 31
Monthly net take home: ~6,000

Current debt:
total student loans: $27,000. 1 person's loans will be paid off in February. We will snowball that money into my spouse's loans. Almost all of these are at 6.5% fixed.
Mortgage: $118,000 @ 3.5% fixed
Vehicle: $18,500

Monthly debt payments
Mortgage: $1,250
HOA (ugh, I know): $340
Student loans: $1,200
Car: $370
Parking: $100

The game plan
Part of my family's 5 year plan is to move out of IL, and to purchase a home. With real estate prices rising, part of this discussion has been driven by FOMO. Come time to move, we don't want to be sitting on devalued property. The misses and I are considering selling, using the proceeds to pay off all debt, saving the remaining cash. Using conservative estimates of a $225,000 selling price, we are looking at remaining cash of approximately $50,000 after paying off debt, realtor's fees, and home improvements prior to sale.

With monthly cash freed up from eliminating debt payments, we are looking at the following monthly amounts:
Income: $6,000
Rent: ~2,000
Average monthly expenses since 2014 (including utilities, groceries, vacations, dining out etc etc): ~$1,650
This leaves us with ~ $2,350/month cash for saving, investing, living, and eventually moving out of IL.


So in summary, if you were in our shoes, would you sell the condo?
I would not trade a mortgage for a higher rent payment unless:

- I was sure the market was going to fall - Chicago has real fiscal problems but I don't think the US real estate market as a whole looks overvalued - there are local bubbles but mostly these are justified by strong demand/ supply constraints (the tech sector and SF Bay area for example)

- I knew I was going to move in 1-2 years at most

I'd keep the lower cost of owning (v renting) and concentrate on paying down my non mortage debts.

dknightd
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Re: Time to sell our condo? Advice needed.

Post by dknightd » Thu Nov 01, 2018 8:08 am

I'm not sure I see any advantage in selling then renting in the same area. Are you trying to time the real estate market? Do you regret buying your condo? Why are you considering doing this? How long have you lived there?

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Cottons
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Re: Time to sell our condo? Advice needed.

Post by Cottons » Thu Nov 01, 2018 8:00 pm

We appreciate all the replies.

One big thing I forgot to mention, and I'll update the original post as well. I'll be starting grad school in January, and this will be paid with a mix of out of pocket, loans, and tuition reimbursement. So if all goes well we are looking at 2 years of school, followed by (hopefully) more gainful and fulfilling employment, then relocation.
dknightd wrote:
Thu Nov 01, 2018 8:08 am
I'm not sure I see any advantage in selling then renting in the same area. Are you trying to time the real estate market? Do you regret buying your condo? Why are you considering doing this? How long have you lived there?
No, not trying to time. I know that is a fool's errand. Our neighbors are a daily frustration (which I know, there is a possibility that this could continue in a rental,) so sometimes yes, regret does exist. We have owned this place almost 5 years, with a total of nearly 8 in the neighborhood.

Valuethinker
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Re: Time to sell our condo? Advice needed.

Post by Valuethinker » Fri Nov 02, 2018 4:10 am

Cottons wrote:
Thu Nov 01, 2018 8:00 pm
We appreciate all the replies.

One big thing I forgot to mention, and I'll update the original post as well. I'll be starting grad school in January, and this will be paid with a mix of out of pocket, loans, and tuition reimbursement. So if all goes well we are looking at 2 years of school, followed by (hopefully) more gainful and fulfilling employment, then relocation.
dknightd wrote:
Thu Nov 01, 2018 8:08 am
I'm not sure I see any advantage in selling then renting in the same area. Are you trying to time the real estate market? Do you regret buying your condo? Why are you considering doing this? How long have you lived there?
No, not trying to time. I know that is a fool's errand. Our neighbors are a daily frustration (which I know, there is a possibility that this could continue in a rental,) so sometimes yes, regret does exist. We have owned this place almost 5 years, with a total of nearly 8 in the neighborhood.
OK that's 2 important pieces of information.

You will be in grad school so minimizing cash outlays is important.

Neighbours. Uggh. We had that problem, and in retrospect sold and moved 5 years later than we should have. If you rent, you can move (at least once a year).

It really depends on hassle factors and the tradeoff between.

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