Move & sell or hang on?

[tmitchell]

I’m sorting through a decision around where I live and could use some input.

I have a mortgage on a condo I purchased 4 years ago (590k), mortgage balance is 420k, could probably sell for $650K. After expenses & repairs and selling cost I figure I’d break even. I could rent it out and also break even, but unlikely to have any cash flow unless I recast the mortgage, and even then only a hundred or two per month. Current total cost is $2850/mo. This is in LA btw.

My SO and I have been together for 5 years but have always lived in our own places. He has a rent controlled apt for $2000/mo in a much more desirable neighborhood, but the place itself isn’t as nice and only has one parking space. His roommate of 5 years is moving out next month, which opens the opportunity for us to take the plunge and live together. We get along great so no worries there, but we’ve also made living apart work fine.

So options are:

1. Stay the course as is. He gets a new roommate (or not) and we keep living separately.

2. I move to his place and save almost $2k/mo splitting cheap rent. Question here is: do I sell the condo or try out land-lording?? Is it even worth thinking about or just move on? This would allow me to continue to save for the “forever home” (whatever that means) while deepening our commitment.

3. We buy or rent a new place. Cost of a 2br condo in his neighborhood would be at least 800k + hoa fees, so significantly higher. Rentals for the same start around 3k/mo, but likely more like 3500-4500/mo.

3. Ultimately we don’t want to stay in LA forever but don’t have a plan yet regarding next moves. Buying a house here would be minimum 1.5-2m for a starter w/o 2-3hr commutes!

Financially I’m almost FIRE in current situation. He is not and wants to keep working. I’m on the fence. If we moved to a cheaper city we could live off my stash, but that’s not being seriously considered at the moment.

Any thoughts here? Especially around selling or renting the condo if I did move?

Thanks!

 

[OldShooter]

In general I would not want to own real estate in any of the places with serious financial problems, like Illinois, Chicago, California, and others with particularly bad pension liabilities. After the dust settles on this current situations, there may be other states that emerge with serious problems. ND and TX, maybe, due to oil revenue problems.

 

[joeprintz]

Sounds like you have much more important decisions to make than the money involved.

 

[W2R]

Any thoughts here? Especially around selling or renting the condo if I did move?

I think that whether or not you live with your SO is a personal, emotional decision and not a financial one; just do what feels like the best thing for the two of you!

As for selling or renting the condo if you move in with your SO, I'd sell it (and take a loss if necessary, to do so). To me, renting property sounds too much like having another job. Ugh.

I should add that as for the economy and real estate market predictions, I have no clue.

 

[Aerides]

I wouldn't make a decision on moving in with an SO based that much on finances and convenience. So, if you do go ahead, and move in with him, keep your place for a good 6 months or so, then if it works out, sell both and move somewhere new together? but don't sell yours till you're sure he's a keeper. Perhaps it's hard to read tone, but you don't sound head over heels excited to move in together.

I also wouldn't want to be a new landlord in the current economic environment.

 

[cathy63]

I would move in with the SO and rent out the condo. Do double check the rent control laws though and make sure that swapping tenants doesn't affect the rent more than you expect.

Keeping the condo for now allows you more flexibility in the future, and you've said you won't lose money by doing so. You'll be living close enough to manage it as a rental property yourself, and a single unit in a condo building really shouldn't take much of your time and attention as a landlord. You can still sell it in a couple of years when hopefully the economy will be more settled and you may have firmer plans for your forever home.

 

[NgineER]

My initial thought when reading the first few lines was that you should sell it. But after reading the entire post I am not so sure.

It seems like it would be beneficial to see if you would get along living together as well. Eliminating roommates and dropping your housing cost to less than half would certainly be attractive to me. But I'd also want the opportunity to move back should the situation change.


A couple of things to consider.

1. Can you sell by yourself? Get it listed on the MLS with a fee only service should save you at least $15k. It looks as if you've had decent appreciation over the last four years, so I would expect that you would more than break even.

2. Can you rent out your property, does the HOA allow it? I am a proponent of rental real estate, but only if it makes financial sense.
3. What are current rents in your neighborhood? I like to use rentometer to check rents.
4. What does the HOA fees include.
5. Would you cash flow without appreciation? Or at least be neutral? I usually calculate that about 40% of my gross income will go to long term expenses, taxes, vacancies, utilities etc. Then there is the mortgage payment on top of that. I have never gotten a condo to work out well when running the numbers, but that always assumes a income property mortgage. I never count on appreciation of the properties I have (though there clearly has been in our area).

 

[carnivalday]

I can't tell you how many times Ive known people in relatively long term relationships who decided to move in together, and in 2 months they wanted to kill each other and broke up. This may not be the case here; but remember that people generally move in together when on good terms and move out on bad terms. I think Id definitely do a trial run to see if living together will work, at least for a month.

 

[copyright1997reloaded]

I can't tell you how many times Ive known people in relatively long term relationships who decided to move in together, and in 2 months they wanted to kill each other and broke up. This may not be the case here; but remember that people generally move in together when on good terms and move out on bad terms. I think Id definitely do a trial run to see if living together will work, at least for a month.

Although holding on to your old home (at least without renting it out) can be seen as a sign of lack of commitment.

To me, the bigger question is whether the OP wants to be a landlord. It can be full of "excitement" and from a financial perspective I would be wary at the moment having a large exposure to real estate. Having said that, I've always been wary about having a large exposure to real estate.

 

[Montecfo]

After being together 5 years if I did know if I wanted to live with someone ( or, perhaps unthinkably, marry) I would probably move on and keep my condo!

 

[tmitchell]

Thanks for your input folks, I appreciate it. My SO and I spend a lot of time together so I'm not worried about things blowing up between us. I think my hesitation is more about not loving his place, while also not loving my neighborhood & commute. That's more the trade off than interpersonal.

Seems to be about split on keeping/selling. I think the idea of testing the move-in waters is fair, and I suppose it wouldn't be too hard being a landlord.

In terms of HOA and cash flow, I do think I'd be able break even--though minus repairs.

I spoke to my real estate agent today as well and he said that things are REALLY up in the air thanks to Covid. It seems possible that there'd be a window this summer where I could get out and break even, but he feels given the conditions here there will be a ton of foreclosures in the coming year. So that adds a piece in terms of getting out while the getting's good (if possible) and maybe pick up a better deal in a year or two.

No way to know for sure but an interesting perspective to add!

 

[mrfeh]

Sounds like you have much more important decisions to make than the money involved.

+1

Combining finances/large purchases when not married is a recipe for disaster.

 

[The Cosmic Avenger]

I can't tell you how many times Ive known people in relatively long term relationships who decided to move in together, and in 2 months they wanted to kill each other and broke up. This may not be the case here; but remember that people generally move in together when on good terms and move out on bad terms. I think Id definitely do a trial run to see if living together will work, at least for a month.

Not to be a spoilsport, but I agree; even spending almost every night together as a couple at one place can feel very different from moving in together. Think of it this way: when you sleep, you only occupy the approximate volume of a coffin, but how comfortable would you be actually sleeping in a closed coffin?

Don't get me wrong, I'm happily married, I just chose a very dramatic example because our minds often perceive the exact same choice very differently based on the other choices available (or not).

 

[sheehs1]

So options are:

1. Stay the course as is. He gets a new roommate (or not) and we keep living separately.

2. I move to his place and save almost $2k/mo splitting cheap rent. Question here is: do I sell the condo or try out land-lording?? Is it even worth thinking about or just move on? This would allow me to continue to save for the “forever home” (whatever that means) while deepening our commitment.

3. We buy or rent a new place. Cost of a 2br condo in his neighborhood would be at least 800k + hoa fees, so significantly higher. Rentals for the same start around 3k/mo, but likely more like 3500-4500/mo.

3. Ultimately we don’t want to stay in LA forever but don’t have a plan yet regarding next moves. Buying a house here would be minimum 1.5-2m for a starter w/o 2-3hr commutes!

Financially I’m almost FIRE in current situation. He is not and wants to keep working. I’m on the fence. If we moved to a cheaper city we could live off my stash, but that’s not being seriously considered at the moment.

Any thoughts here? Especially around selling or renting the condo if I did move?

Thanks!

While reading, I had a little red flag when I read your last statement of #2 "while we deepen the commitment." Your #2 requires a deep commitment does it not?

Other red flags:
You are almost FIRE'd and he is not. Yet you are willing to live off your stash if you move later? Granted, you said this is not being seriously considered but ask yourself, "why are you ok with that" even if hypothetically thrown out as an option?

Keep your condo for now perhaps trying to do a years rental if you decide to move in with him. I assume he is expecting you to pay half the rent on his place? In return will he forgive any of that, should your place not rent? Can you swing it if that happens?

Seems this opportunity is forcing some "relationship" decisions that were not part of the equation before. Would you be facing this decision had the other roommate not moved out?

 

[Bamaman]

Congratulations on almost achieving FIRE while single and living in an ultra high COL place. That is quite an achievement.

I too was in a 5 1/2 year relationship with my wife 31 years ago. Is there any chance that your boyfriend is going to make a final commitment?

If you're going to cohabitate, go ahead and move in. But for now you should be taking it slow and easy and keep your condo. But I cannot imagine an individual owner renting out such an expensive asset.

If you are considering a change of scenery and get out of Los Angeles, you need to think about where you'd like to live permanently. And get started executing that plan.

I'm just so thankful that I was raised in an ultra low COL place that allowed to retire at age 58. I have 3 cousins in Los Angeles area, two of which have to work two jobs to make ends meet. And both will have to work into their 70's because the COL has prevented them from saving for their future. Last time I saw one cousin he was living in a VW bus behind a bar in El Segundo.

Good luck to you.

 

[tmitchell]

My initial thought when reading the first few lines was that you should sell it. But after reading the entire post I am not so sure.

It seems like it would be beneficial to see if you would get along living together as well. Eliminating roommates and dropping your housing cost to less than half would certainly be attractive to me. But I'd also want the opportunity to move back should the situation change.


A couple of things to consider.

1. Can you sell by yourself? Get it listed on the MLS with a fee only service should save you at least $15k. It looks as if you've had decent appreciation over the last four years, so I would expect that you would more than break even.

2. Can you rent out your property, does the HOA allow it? I am a proponent of rental real estate, but only if it makes financial sense.
3. What are current rents in your neighborhood? I like to use rentometer to check rents.
4. What does the HOA fees include.
5. Would you cash flow without appreciation? Or at least be neutral? I usually calculate that about 40% of my gross income will go to long term expenses, taxes, vacancies, utilities etc. Then there is the mortgage payment on top of that. I have never gotten a condo to work out well when running the numbers, but that always assumes a income property mortgage. I never count on appreciation of the properties I have (though there clearly has been in our area).

Thanks and to answer:
1. I've never sold a property by myself and not sure I'd know how since this is the only place I've every purchased.
2 & 3. Yes I can rent it. I'd expect $2800 in rent. Mortgage & HOA are $2700, so $100/mo cash flow.
3. Just building maintenance. Nothing fancy.
4. It doesn't seem likely to cash flow...$1200/yr should cover any minor repairs but not vacancy etc.

From what I've read this wouldn't count much as an investment property...what do you think?

 

[tmitchell]

While reading, I had a little red flag when I read your last statement of #2 "while we deepen the commitment." Your #2 requires a deep commitment does it not?

Other red flags:
You are almost FIRE'd and he is not. Yet you are willing to live off your stash if you move later? Granted, you said this is not being seriously considered but ask yourself, "why are you ok with that" even if hypothetically thrown out as an option?

Keep your condo for now perhaps trying to do a years rental if you decide to move in with him. I assume he is expecting you to pay half the rent on his place? In return will he forgive any of that, should your place not rent? Can you swing it if that happens?

Seems this opportunity is forcing some "relationship" decisions that were not part of the equation before. Would you be facing this decision had the other roommate not moved out?

I wouldn't pay for us both to live, even in a LCOL area. And we've discussed this in fact. He doesn't feel comfortable living off of my stash either and wants to keep working. In fact this is why we haven't left LA yet, since he needs to be in a major city for work!

We would definitely continue splitting expenses.

And to answer your last question, if the roommate hadn't moved out we would have probably just carried on as we have. Previously our discussion around the matter has been to move in together either 1. when we can afford a house with more space (which doesn't seem will ever happen in this god awful expensive city) or 2. when we leave LA and therefore can afford #1.

We have traveled a TON together and always get along really well, so I'm not terribly worried about some new strain. Would I prefer a nice house with a yard over a 2br in the city? Yes! But that may never happen at this rate.

 

[tmitchell]

Congratulations on almost achieving FIRE while single and living in an ultra high COL place. That is quite an achievement.

I too was in a 5 1/2 year relationship with my wife 31 years ago. Is there any chance that your boyfriend is going to make a final commitment?

If you're going to cohabitate, go ahead and move in. But for now you should be taking it slow and easy and keep your condo. But I cannot imagine an individual owner renting out such an expensive asset.

If you are considering a change of scenery and get out of Los Angeles, you need to think about where you'd like to live permanently. And get started executing that plan.

I'm just so thankful that I was raised in an ultra low COL place that allowed to retire at age 58. I have 3 cousins in Los Angeles area, two of which have to work two jobs to make ends meet. And both will have to work into their 70's because the COL has prevented them from saving for their future. Last time I saw one cousin he was living in a VW bus behind a bar in El Segundo.

Good luck to you.

Thank you!! Reaching FI has been a long, difficult haul here no doubt!! Living in a van should def help if your cousin is serious about it!!

Some day I hope to put all the savings to good use in a cheaper place, but it seems like every desirable spot gets more & more expensive every day. I was looking at Boise about 5 years ago and housing prices have tripled!

 

[tmitchell]

Update: Condo is in escrow and we close in 2 weeks. Got out while the gettin's good & feeling really happy about it. We've been updating the rental a bit and are getting along great in the process.

I feel so relieved to be getting out of a lame neighborhood. Guess I learned my lesson about location, location, location.

 

[jw72]

smart move, You will sleep better knowing you are banking 2k a month and no tenants to worry about. You are free to stay, move or retire.

 

[pacergal]

sounds like you made the right decision.

 

[Gremlin]

Congrats! Glad it is working out for you.

 

[Bamaman]

Another congratulations. I'm sure sale of the condo takes a lot of pressure off of you.

It's nice to know you have options, and only good decisions are ahead for you.

 

[Doribe]

I would move in with the SO and rent out the condo. Do double check the rent control laws though and make sure that swapping tenants doesn't affect the rent more than you expect.

Keeping the condo for now allows you more flexibility in the future, and you've said you won't lose money by doing so. You'll be living close enough to manage it as a rental property yourself, and a single unit in a condo building really shouldn't take much of your time and attention as a landlord. You can still sell it in a couple of years when hopefully the economy will be more settled and you may have firmer plans for your forever home.

+1