Sell our condo to buy a new house, or keep it and use as rental?

[ivinsfan]

Thank you all for the comments. I just came back from seeing the model of the property we are considering buying with my contractor friend. Overall, he was very impressed and thought it was a solid choice. He said implementing my idea to bring down a wall was no problem at all and agreed it was a good choice, and that he could do it all in a week or less for about $2K, *including* all materials and a completely new wood floor (the standard floor in all the upstairs rooms is carpet). This is a close friend, so that is the "family" rate, mind you. Otherwise, he said the floor alone would cost that much. But that, all in all, it would be a fairly straightforward project.

In regards to the condo, I hope I am not being overly dramatic. Yes, things have indeed taken a turn for the worst, and I doubt this will be what it used to be (demographics have changed too much), but this is still a very desirable area in the middle of it all: on the beach, close to anything once could possibly want... Some folks love that. I do not (I will take middle-of-nowhere peace and quiet, thank you).

My fear is that our condo will just not sell for any reasonable amount. Our realtor illustrated how, when it comes to condos, this is really a buyer's market, and that the oversupply is gigantic. She thinks we should start with a competitive asking price of around $439K (which means about $405K in our pocket after expenses).

Just yesterday we received a notice from the county. They keep building and building around the area. Next project is a huge new development across the street, next to the intracoastal, in the opposite corner of the block, that will include new luxury condos, a convention center and a 5-star hotel. They do not mention when this will all start. Right now it's all in the early stages. But I know this area will never be UNdesirable, at least not within the year. I am, however, not sure how such a project would affect property values. It's not like there are not a dozen similar projects within a 1 mile radius anyway...

So this is all fine but your comment that your condo will not "sell for any reasonable amount" gives me pause. It will sell for market price, you might not be happy with market price at the moment you sell, but you can't get blood out of a stone. Just be prepared mentally for a sub 400K price when the time comes.

 

[Another Reader]

If that new construction will block your view, it reduces the value of your unit. Because you received notice, you will have to disclose it to potential buyers. Another reason to sell and move on for me.

 

[COcheesehead]

If that new construction will block your view, it reduces the value of your unit. Because you received notice, you will have to disclose it to potential buyers. Another reason to sell and move on for me.

All of the HOA issues will have to be disclosed including the depletion of reserve funds. Any intelligent buyer will walk from a unit like this unless it is an extreme deal.

 

[Scrapr]

You could sell the condo & rent back. Done a fair amount of the time. Especially if it will turn into a rental.

That reminds me. What are the rental rates in the building? If you sold for $420k would that support a rental?

 

[Karloff]

All of the HOA issues will have to be disclosed including the depletion of reserve funds. Any intelligent buyer will walk from a unit like this unless it is an extreme deal.

The reserve funds are not fully depleted. They currently stand at about $350K, down from almost $2 million due to an extensive renovation to the outside of the building, which is 40+ years old.

 

[Karloff]

You could sell the condo & rent back. Done a fair amount of the time. Especially if it will turn into a rental.

That reminds me. What are the rental rates in the building? If you sold for $420k would that support a rental?

Could you clarify the question? What do you mean by Support"? The new owner would be free to rent the unit out, yes. Units in the building rent for anywhere from $2200 to $4K a month, depending on the size of the unit and the season. It is not uncommon to get at least $3500+ a month in the winter for a unit such as ours.

 

[COcheesehead]

The reserve funds are not fully depleted. They currently stand at about $350K, down from almost $2 million due to an extensive renovation to the outside of the building, which is 40+ years old.

Just going on what you said up thread. Still, that is a major deduction from reserves. Anyone looking at a reserve study, if there even is one, would vomit.

 

[Karloff]

Just going on what you said up thread. Still, that is a major deduction from reserves. Anyone looking at a reserve study, if there even is one, would vomit.

I would not disagree with you, I am concerned as well, but these specific repairs and renovations were a necessity.

 

[Scrapr]

Could you clarify the question? What do you mean by Support"? The new owner would be free to rent the unit out, yes. Units in the building rent for anywhere from $2200 to $4K a month, depending on the size of the unit and the season. It is not uncommon to get at least $3500+ a month in the winter for a unit such as ours.

By support I mean what would the rent roll be for the year. Would it cover a 75% mortgage? Just thinking if a buyer wanted to rent it out...would it make sense? All in w/HOA fees

$420 @ 75% = 315k @ 3.75% = 1458/mo + 650 HOA = $2108/mo x 12 = $25,296/yr expenses. Maybe add in a repair line & possibly utilites plus vacancy say 10% or almost $28k. Can you rent it for $2500/mo?

Your best option would be a HO that "loves" the unit & location & might overpay. If a landlord bought it they are going to go through a calculation like this. They will need the numbers to work. Given your stated history of the buildings turning rental I see more landlord than HO interest

During the recession banks were not loaning on buildings that were heavy on rentals. Not sure if that has changed

If you offered to rent back from the buyer they would have a built in first tenant. This could be attractive to a first time landlord

 

[Karloff]

By support I mean what would the rent roll be for the year. Would it cover a 75% mortgage? Just thinking if a buyer wanted to rent it out...would it make sense? All in w/HOA fees

$420 @ 75% = 315k @ 3.75% = 1458/mo + 650 HOA = $2108/mo x 12 = $25,296/yr expenses. Maybe add in a repair line & possibly utilites plus vacancy say 10% or almost $28k. Can you rent it for $2500/mo?

Your best option would be a HO that "loves" the unit & location & might overpay. If a landlord bought it they are going to go through a calculation like this. They will need the numbers to work. Given your stated history of the buildings turning rental I see more landlord than HO interest

During the recession banks were not loaning on buildings that were heavy on rentals. Not sure if that has changed

If you offered to rent back from the buyer they would have a built in first tenant. This could be attractive to a first time landlord

Thank you. We discussed some of the numbers in the previous pages. Yes, it can be rented for at least $2300/month and much more in the peak seasons.

And, actually, you have given me a great idea which I never even thought of. Suppose the condo sells quickly, but our new house is not ready for at least another 4 months... maybe we just pay the new owner rent, or discount a few extra thousands from the asking price, until we are ready to move out? Technically, the property will no longer be hours and liability for repairs, etc., would fall on the hands of the new owner, but being that we have lived here for 10 years, it would be logical to conclude that it is not our intention to thrash the place.

Has anybody been in this position?

 

[Aerides]

And, actually, you have given me a great idea which I never even thought of. Suppose the condo sells quickly, but our new house is not ready for at least another 4 months... maybe we just pay the new owner rent, or discount a few extra thousands from the asking price, until we are ready to move out?
Has anybody been in this position?

Scrapr mentioned that idea a few posts back. It's up to the buyer. If properties in your building are mainly selling to investors for rental purposes, then you coming as a first renter could be win-win. If not, then it's a negotiation, or not, depends on the buyer.

In your case, I'd pitch that, but I'd not worry about finding a short term rental in late spring/summer of S.FLA. Sure, it's a pita to move twice, but my main concern would be selling a place you want to be out of sooner than later.

 

[ExFlyBoy5]

If that new construction will block your view, it reduces the value of your unit. Because you received notice, you will have to disclose it to potential buyers. Another reason to sell and move on for me.

That's not necessarily true, depends on the jurisdiction.

 

[38Chevy454]

It is quite common to sell and then remain living at the sold place by leasing back for a month or more. As several have suggested, for a landlord buyer this would be an attractive option to have built in tenant occupancy right at first. This type arrangement is good for you as it saves moving twice (you indicate this is very much to be avoided, per your words), even if you pay a little premium on the monthly lease fee.



You as the now tenant would have a formal signed lease agreement. The amount is what you agree with the buyer. It could be constant flat rate, same $ each month; or could be variable as higher winter and then reduce in summer. It is all up to negotiation. Since you are looking at 8 months or more, you can probably do a flat rate.

 

[Karloff]

We will probably be putting down the $5K deposit later this week. This will allow us to take advantage of the $30K the developer is offering in upgrades at their cost only until the end of the month. Goal is to then pay only $500/month until closing. We will put our condo for sale in the upcoming days, and will "play it by ear", so to speak. Ideally, we would find a buyer a few months prior to the closing on the new house that will work with us on a lease or short rental and allow us to stay in the property until the new place is ready. Several neighbors have also shown interest in our garage parking space, which can be sold by itself for $20K or more.

Really stressed at the moment. Have not been sleeping well for days... part of me does not want to move, mainly to avoid the mess and the financial challenge, and the uncertainty and the not-being-able-to-save anymore (at least until the condo sells) but we have to move, as this place is no longer making us happy. I am an extreme OCD type, so the move will probably take a few years off my life... but it needs to be done. I appreciate everybody's help and insight!

 

[ExFlyBoy5]

...

Really stressed at the moment. Have not been sleeping well for days... part of me does not want to move, mainly to avoid the mess and the financial challenge, and the uncertainty and the not-being-able-to-save anymore (at least until the condo sells) but we have to move, as this place is no longer making us happy. I am an extreme OCD type, so the move will probably take a few years off my life... but it needs to be done. I appreciate everybody's help and insight!

It will get better...it just takes time. In the span of a short 6 months, I took care of my Dad in his dying days, settled his estate (including selling his house/my childhood home), sold our home in Atlanta, moved to a rental in our new home state (1,000 miles away from Atlanta), bought a *new* home and just finished moving into that...oh yeah, and I got *real* stupid and decided that I would take the bar exam next month. To say I have lost a little sleep is an absolute understatement. BUT...I can see the end is in sight and I can finally truly relax a little bit.

I think you have thought this out well and are making a good decision. It will be a challenge and you know that...but in the end, it will all be worth it.

 

[Karloff]

It will get better...it just takes time. In the span of a short 6 months, I took care of my Dad in his dying days, settled his estate (including selling his house/my childhood home), sold our home in Atlanta, moved to a rental in our new home state (1,000 miles away from Atlanta), bought a *new* home and just finished moving into that...oh yeah, and I got *real* stupid and decided that I would take the bar exam next month. To say I have lost a little sleep is an absolute understatement. BUT...I can see the end is in sight and I can finally truly relax a little bit.

I think you have thought this out well and are making a good decision. It will be a challenge and you know that...but in the end, it will all be worth it.

Thank you so much.... I am sorry about your recent loss, and wow... that is quite the full calendar you have! I wish you the best of luck.

 

[RunningBum]

Really stressed at the moment. Have not been sleeping well for days... part of me does not want to move, mainly to avoid the mess and the financial challenge, and the uncertainty and the not-being-able-to-save anymore (at least until the condo sells) but we have to move, as this place is no longer making us happy. I am an extreme OCD type, so the move will probably take a few years off my life... but it needs to be done. I appreciate everybody's help and insight!

Sometimes making the decision, which seems like a sound one, will take the stress off. There will be stress in selling your place, and moving, and with things that don't go perfectly in the new construction, but maybe just getting over the hump of deciding what to do will help.

 

[tbeltrans]

My wife and I have lived in our 72 unit condo association since 1988. Much of that time, I have been on the board, and much of that time, as president. My perspective may be somewhat different from that of a typical resident as a result because I have to view what is good for the association, rather than one resident.

We put a cap on rentals at 15%, or 11 units in our bylaws. This required a minimum 67% majority vote by the owners. The reason is an attempt to keep out investors. A strong association will consist of a majority of homeowner residents. Our rules and regulations discourage homeowners leaving permanently with the idea of keeping the condo as a rental. However, I am reasonably sure that would not hold up in court.

My own observation has been that most residents think in terms of what is best for them, while the board must think in terms of what is good for the association, so the board must try to provide a balance - some leniency in the rules to accommodate specific situations, while at the same time, insuring that residents self interests do not incur problems for the association.

We see rentals as a way to ease the issues surrounding a sudden job transfer, a relocation of any kind, kids inheriting the parents' condo, etc., rather than as a long term investment. Unfortunately, we have little control over that other than to appeal to the owner's sense of the community they are leaving.

We can hold landlords responsible for everything the renter does, to the point of imposing fines and even foreclosing if it ever gets that far. Fortunately, we have had little problems with renters up to this point, and have very few renters.

Considering the sense of community, owners who are residents have a vested interest in the long term viability of the association as a community, while for renters, it is an apartment building. This does not mean that all renters are bad people or troublemakers. Our experience so far has been that the renters have been just fine. However, as long as the large majority of residents are owners, the sense of direct ownership in the community can be maintained.

Tony

 

[FIREarly]

If you have the will and desire and truly want to host people than rent it out. It only feels like a job if you are forcing yourself to do it. If you enjoy it than go for it. It is truly a thought that you know the answer to and your answer is the right answer.

 

[gooddog]

Catch up on changes to IRC 121 made in 2009, under the Obama administration before making a decision. The changes are significant regarding rental property and the taxation should you ever decide to sell at a future point.

 

[PoorOldCountryBoy]

After commissions the condo could get you $350 K net, put it in a REIT etf like VNQ yield 4.5% plus long term appreciation **without lifting a finger **. And it is liquid so you can sell it immediately.


Is there a danger with extreme weather that could result in a total loss (flood or hurricane?). Another reason to sell the condo...

 

[scottpush]

Rental Condo!

Hi


I retired a year ago at 58. I have 9 rentals and live off of that income for the most part. I manage all of them and, yes, they can definitely be a pain sometimes. It's not for everyone and sometimes I wonder if it's for me. But I have no other real way to provide income.



Several of these are condos. If you do your due diligence then finding a decent tenant shouldn't be too hard. I'd say try a change in mindset and see if you like it. $10K a year is pretty good.



On the other hand maybe you really already don't want to deal with any of the problems that arise with rentals. That is your decision. One drawback to condos as rentals is exactly what you brought up that annoyed you with being in a condo. Your tenant may throw a fit if there is too much noise. If its really that noisy I probably wouldn't rent it out. I've had those issues with the rentals and its very frustrating. You'll also have to be sure the prospective tenant will follow the myriad of rules that a beloved condo association will bestow on him. Usually that's no problem but you have to keep the communication going with the tenant every time new trash rules, or termite inspections, etc, occur. For me I get notices all the time about all kinds of crap from the association. Pretty annoying.


I'd probably sell a couple of my condos if I wasn't on ACA healthcare. I need to keep line 37 of my 1040 below about $48,000 each year until I'm eligible for Medicare. If I sell one then it most likely will kick me above that number. Then I don't get the about $8k or so in subsidies I get each year from Obamacare. Complicated society we live in...Scott

 

[Karloff]

Thank you all for your input and advise. We have put our condo for sale and are in the process of negotiating with Pulte. They are aware of our situation and the sales rep is trying to work with us so that all we have to do is put $5K down, and then nothing until the house is ready (the goal being that by that point our condo would be sold and we can come up with the total balance at the moment of closing, avoiding the need for a mortgage).

We definitely do not want to have to move twice, and we definitely do not wish to become landlords. Of those two things, we are sure. So we have put the condo for sale in our classified ads section (lots of folks use that space for similar purposes, and it gets lots of visibility, since it is in a very heavily trafficked area in the building). It went up this AM and we already had a call. We will try and sell the parking garage separately as well, since it looks like we can get about $20K for that alone. We shall see.

My hope/wish is that we can sell it ourselves and we can work out a deal with the new owner so that we can stay here until our new home is ready. If, on the other hand, nothing happens during the next two months or so, we will go with a realtor and see what works best at that point...

Very stressed at the moment simply because we have accumulated so much in the last 10 years. This will NOT be an easy move, but I know we will feel better once its done. And it needs to be done, of that we are sure.

 

[NYEXPAT]

You say that only under priced units are moving. Maybe they are selling under the price the seller wants, but if that's the price that is moving them, it is the REAL price. At the right price (where seller and buyer agree on value), the unit will sell within a week or two. A corner unit should sell at a premium.

Especially, if it is a SE corner!