I'll try to keep this short and sweet.

Bought a condo in 2006 (that I still currently reside in). Paid my mortgage off in late 2017 and now own the condo outright. The fiancée and I want to start looking to purchase a house or townhouse in 2021. My question is for folks with more experience in this department than I'll probably ever have. Should I sell the condo and use that income for a down payment on a new place? Should I keep the condo, rent it out, and use that monthly income to pay our mortgage on a new place? Perhaps I should take a loan out against the condo and use that as down payment on a new place? Or, and a few people have told me this, is it stupid to sell a piece of property that I've paid off and own? My father suggests I sell because he has had some bad experiences owning rental property. What say you?

This is in the great state of Louisiana, if that makes any difference. Any advice, horror stories, or suggestions would be greatly appreciated.

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Find a way or make one.

Sell the condo.
I am in no way a pro, but too many of my friends/acquaintances Say that the troubles and expense out weigh the rent received.

I agree that renting a property out is a major pain in the neck. In my case, when I was younger and employed, there were tax advantages to me that made it worthwhile to buy houses and rent them out. I still rent out one of these, but have a very stable tenant who always pays rent on time. When he decides to leave I plan to sell it.

I suggest talking to your banker. It's a great time for mortgages, currently at historic lows. Using your existing condo as collateral, other assets and your income, your bank will give you a letter attesting to your ability to buy a house. When you find a house you like, you'll be ready to put in an attractive offer immediately. At that point, you can put your condo on the market.

Be realistic about how much/how expensive a house to buy. I mean don't overextend yourselves. On the other hand, if you're both employed, with a lot of working years ahead, well, figure than in, too.

Good luck to you!

When owning rental properties, either own a lot of them or none.

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Front sight and squeeze

No real estate expert here, but I do have several friends who have had rental houses through the years. All of them have sold their properties, as tax laws have changed to the extent that their expenses were far outpacing the income generated.

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Pisgah

I would keep it simple and just look at it as a housing upgrade. Sell it and put the funds into something better.
The fact that I owned RE outright, wasn't a reason for keeping it. No guarantee that you're going to get a good, prompt paying tenant for it.
Your age might be a factor in all of this. At my age of 68, I'm definitely in the keep it simple mode. Twenty -thirty years ago, I may have looked at it differently.

My opinion - NEITHER is a good option.

Own a house that was bought for renting to now deceased friend.
Good condition and value approaching lower end of local prices.

LISTED with a Realtor - Only got Low-Ball offers. Worst was a group of "investors" low-balled and wanted thirty days to get financing. Any serious investors would have made some prior arrangements.

I have had BAD luck with renting to tenants.

1) Did not pay rent. Small Claims Court Judgment - No way to collect. The amount too small for any lawyer to get involved. Some years later tenant filed Bankrupt - finally got some small amount paid.

2) ENTITLED Miss - Called shop for air conditioner service at weekend rate without contacting me first. NOT an emergency situation. Replaced a faucet. (again without contacting me) A real dummy did it - Hot/Cold lines reversed form standard. Put a load of crushed rock to have a parking pad over the sewer line. Again without any contact of permission. Told her to NOT park over sewer line. Miss ENTITLED and her many men friends totally ignored this instruction. At Lease end she did not pay last months rent or utilities. She did not move out when lease expired. Went to court and got EVICTION order/ Miss ENTITLED and her move-out helping friends trashed the place. Small Claims Court - Judgment- Miss Entitled is unemployed and has only child support as her only visible income.

I am selling to a Mexican family on Land Contract for full value. They are hard working, honest, and had significant Down Payment. No Sales Commission either.

Do not recommend this sale method for you. I do have a Real Estate license and knowledge of legal requirements

Bekeart.

Bekeart

This sounds like solid advice for sure. Much appreciated.

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Find a way or make one.

Have owned a number of rental houses and apartments.
It can be a Pain!
You best move is probably sell the Condo and buy a house.

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NRA LIFE MEMBER

Congratulations on your engagement. Don’t mess it up, or you’ll need that condo!

Renting... Don’t do it.

How easy will it be to sell your condo? Does it have an association? Monthly dues? Even without dues, you’ll have property taxes, utilities and insurance to cover until it’s sold.

I owned a condo before the Mrs. and I got married and she didn’t want to live there. We found a contractor spec home we liked, bought on with a 20 year mortgage and then I listed my condo. It took almost a year, but I finally sold it. Things were tight for a while owning the 2 properties, but we made it. After a few years, we refinanced our home loan to a 15 year lower interest mortgage. We made bi-weekly payments and paid it off in 10 years. Back then, interest rates were 5-7% with good credit.

Having some cash in the bank from the sale came in handy. We had to add a lawn, sprinkler system and AC in the first few years, not to mention window treatments, towel rods and some upgraded lighting. I also had and alarm system put in, which lowered our insurance rates and gave us some peace of mind. Siding and a few windows had to be replaced about 8 years later. Since paying off our mortgage, we’ve had to put on a new roof and replace the heating/cooling system, a dishwasher, washing machine and a hot water heater. Home ownership isn’t cheap, but at least you own something at the end of the day.

This is a great time to buy. Interest rates are at historical lows and most lenders allow you pay off early without penalty. Any extra payments come right off the principle. If your condo is an easy sell, you may be able to make an offer to buy contingent on selling. If you can swing it, get pre-approved for a home loan based on both incomes and a modest deposit. You should be able to put both names on the loan and list both incomes.

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"I also cook."

Convince the Fiancé that she Loves the Present Condo
If you own it outright why go into Debt?

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Compact 9mm Just my $0.02

For those suggesting you sell because the expenses will outweigh the income, I don't see how that's possible if you own the condo outright. I had a townhome I rented out for a few years that I lost a little money on even with the tax break (I was hoping to keep at as a future vacation property), but I had a substantial mortgage on it. If you do rent it out, do yourself a favor and hire a management company to handle it. For me the fee was worth not having the headache of managing it myself.

Owning "Land" in these times is a good thing and prices will always go up.

I was always sorry when I sold real Estate, when I saw it ten years later, and what it was bringing in.

Tax's are a minor bill to pay for having land and up keep can be minimal
if you screen your tenants and have good contracts !!!

Don't feel sorry getting a good amount of rent. Usually the higher the rent, the higher class of people will be in the unit.

If the laws in your state are very poor for returns on rentals.........
then selling might be your best option.

Good luck.

Find someone locally who owns rental properties and pick their brain! Real estate can be a great long term investment in the right market

Today's real estate market is hot, making it look like you ought to buy and hold every piece of real estate you can afford, but long term the odds are stacked against you unless you own and rent many properties for a living. The Case-Schiller Index has tracks real estate prices back to the 1800's and shows real estate investment does not beat equity investment (stocks & bonds). That's the long view. The short view is touted by investors far and wide who have not yet lost money in one of the volatility swings that nobody can predict such as the 2008 meltdown, COVID pandemic, suburban migration from urban unrest, etc. Current soaring real estate prices resemble the pre-2008 bubble. You should realize a good price on your condo and find that buying a new house in a seller's market is challenging, but you need a place to live.

Think of the condo as an investment. Will you make more money from rental income and appreciation or will you make more from taking the cash and putting it in a different income producing investment. Is real estate in your area going up in value or stagnant? If going up, then rental prices will also go up and you can raise rents periodically to match local averages thus increasing income. If not, buy a stock fund. If you keep the condo, using a property manager makes sense. They know the rental market better than you and also how to properly screen tenants.

I'd consult with your tax man and real estate broker. When you sell, you'll probably be looking at a nice profit, and waiting to sell might throw you into a capital gains tax nightmare that you might not experience if you sell before years end. Good luck either way. Just don't rent.

I'm 65 and been in a house for years that I've never been able to keep up due to poor health. Thinking about getting a condo. At this point I wouldn't want to move into a house and take up maintenance and yardwork.


For the OP:

Keep the condo and live in it.

If you rent it out, have a company manage it. I don't even want to know this property exists if I leave it.

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"He was kinda funny lookin'"

Bought a condo almost 3 years ago. Renting it out. Rent easily pays payment. Have the house my parents bought. Small started type. Keep it rented. Have had some repairs on the house. But, income certainly exceeds costs and return on investment is very good. Lady who owned the condo above us sold. Almost doubled her money. Figure when I retire, my wife and I can sell both and move ... buy ... whatever. But she really likes the condo and we did buy it b/c she wanted to live in it so either way ... win/win. Understand that sometimes a rental is trouble. But, there are some nice people out there who will take care of your property and pay rent on time. JMHO. Sincerely. bruce.

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<><

Hate to be a downer, but check with your lawyer about what could happen if you're jointly invested in a new property with your fiancee and the engagement goes south.

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de minimus non curat lex

This and listen to your father.

Not sure if you are asking all the right questions. First, do you want to be a landlord? That should be the first question you answer. My 2 cents.

I own my house clear. I have two rental homes that are very nice and could easily be sold right now for a profit as our market is white hot.

However, my wife and I wanted to diversify our "investments" (think of it this way makes more sense) into hard assets such as real estate. We keep our properties up very well, in fact just today I put a $4,000 HVAC unit in one of our homes. It cuts into the profit but also adds to the value.

If you want to be a landlord then learn how to get leases arranged, laws and all of that. If you don't want to mess with things then sell it and use the money on a home. Being a landlord is not for everyone, it can be a pain but it also has some nice benefits.

If you think about it, lets say you buy a $70,000 house and rent it out and make a few hundred a month over your payment (assuming you finance), taxes and insurance. Some years you will have maintenance expenses, just be prepared like your own home. In reality, the tenants actually are making your payment. After 10-15 years it is paid for by the renters and you have a paid for asset.

Lots of ways to look at it.

Do you have a place to live if you put your condo on the market and look for another one ?
Here's what I experienced last year. I also owned my condo outright. I went to the bank who had held the mortgage for 19 years and asked about a "bridge loan" to finance a new home and to be paid off within 60-90 days when my condo sold.

They told me they don't do that any more. I had to go to an outside investment firm who loaned me the money for 90 days at a high interest rate and even higher loan fee.
My original bank would have only loaned me 70% of the condo value as a Home Equity Line of Credit which would not have been enough to pay for my new home.
And selling my condo while I was still living in it really sucked. It would have been much better to have been vacant.

I just sold a rental townhouse I owned, had the same tenant for nine years and he was great. I always vowed to sell the place if he left as I had no idea what problems I might have with a new tenant. I did a small amount of rehab on the place when he left, listed it, had 31 showings in four days and sold it above the listing price. The market seems very good now. I am glad to no longer be a landlord.

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John. SWCA #1586

First of all I do not do real estate investing. My dad did for many years and did well at it. There are 3 ways you can make money:
1. Positive Cash Flow - you bring in more than it costs
2. Appreciation - long term capital gain on your investment. For example you buy for 100k and ten years later you sell for 150K 5% appreciation per year assuming positive cash flow(simple math for illustration)
3. Forced Appreciation - Buy home make improvements then sell quickly or rent then sell. For example, buy a 2 bedroom with walkout basement. You finish the basement and add a deck etc. rent for a period of time then sell.

All 3 incur risk:

1. Real Estate Prices Fluctuate
2. Carrying Costs - can really have an impact on profitability - loan interest, insurance, taxes, vacancy etc. add up.
3. Unstable Renters

These are the considerations and why I choose to invest in the stock market. You don't get a call at 4am saying the hot water tank stopped working and they want it fixed by 7am when they need to get ready for work. If that happens in your own home you are taking a cold shower till you can get a repairman out to fix it. Renters can be unreasonable and you better have the lease on your side, because if you are the dafter any lack of clarity is on you.

So, what do you do ?

Personally, I would sell the condo and put the money in the market and finance the house. You should be able to easily get better than a 4-5% return.

It is the old other peoples money approach- use theirs to buy when borrowing costs are cheap and let yours work for you.

On another note, buy the cheapest house in the best neighborhood if you can. You never want to be the most expensive house in the neighborhood. Ride the appreciation of the area at the lowest cost, plus the house will sell in a NY minute when you decide to get out.

Good luck to you !

Owning one rental can be, and probably would be, a gigantic pain.
I would stay in the condo. Think of what all you can do with the
money you would be using for payments. Invest, buy guns, etc...

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In Omnia Paratus

Sell the condo and use the proceeds as your next down payment or principal curtailment, unless you have your heart set on being a non-professional landlord. I remember going with my dad from our new home east of Cleveland to our old house west of Cleveland to chase down deadbeat tenants. This was before the interstate highway system was built up there and it was a long trip.

You might be able to work the same kind of deal I had when I had my current house built. I was living in my house in Maryland and had it listed for sale during the construction of my current house in PA. When I settled on my new house, the bank put a blanket mortgage on both houses, with the deal being that when I finally sold my old house I would make a big principal curtailment out of the sale proceeds and the payments on my new house would be recalibrated in line with the reduced loan principal.

Others have pointed out the negative aspects of being a landlord so I won't dwell on that.

Suggest you speak with your bank or credit union about a home equity line of credit on the condo. With good credit and a decent property you may be able to have credit up to around 75% of market value. With that you can make a down payment on the house you want and negotiate a good deal with minimal stress. A HELOC is usually much easier than a refinance mortgage, little or no closing costs, may not need to pay for appraisal, little or no loan origination fee or all the other costs involved in a new mortgage.

Selling and buying can cause a lot of stress. Sell first, then move into a rental (and find storage for your household goods), then purchase the new home and maybe have to negotiate a lease cancellation on the rental (or maybe just pay max rent to get a month-to-month deal). Either way, two moves and all the hassles that go along with that.

Try to negotiate a flexible closing date on the new house to allow you to close and move after your condo sells. That may cause some problems with the sellers of your new home.

With the HELOC you can purchase the new place, take your time moving in (or doing paint, carpet, countertops, whatever before the move), get settled in, then put the condo on the market. Yes, you'll have payments on the new home and on the HELOC for the interim period, but to me that beats having to move twice with little flexibility in scheduling, etc.

My $0.02 worth!

I asked a very similar question here a few years back.
Going To Rent My House

The response was predominantly negative, a recitation of all the horrors one might expect as a landlord. After seven years, I have to say my experience has been 98% positive.

I had one tenant from January 2014 until February of this year. She gave me notice in February. I had a few repairs done, installed new carpet in three rooms, did a little work on some porches.

I missed one month rent. Had a new tenant in by April 1. So far, they have paid the rent on time, and haven’t harassed me about minor stuff.

The first tenant did no damage, just normal wear. She didn’t average calling me three times per year about problems. Hopefully, the current tenants are going to be just as good. It seems that way now. Knock wood.

I have not had to advertise my home. Both times, I have able to find tenants through word of mouth.

The rental income has been a tremendous help. It has let me finance my cow operation without getting into our retirement income. The tax advantages should be apparent. I can do regular maintenance and upkeep on the property and write it off.

I realize I am very lucky, but the point is that there are some good rental stories out there. Hope I’m not jinxing myself.

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Georgia On My Mind

sell it. Market is hot low interest rates that could change. Condo fees go up,renters have a lot to say. If the renter cant pay rent under new covid guideline you can't evict. always make sure the water and electric is in their name in some states you are not allowed to turn off utilities if you do you can be sued, because you are punishing the tennet. whats to stop them from moving in more people, no pets, oh its a comfort pet. Always get a first ,last and a double security deposit. There are so many scammers out there its hard. Never be to eager to take the first dollar from somebody without checking them out carefully, I would rather leave my place vacant than rent to the wrong people. I could tell lots more stories but will stop here dont want to get further of topic

I truly appreciate all the replies, y'all. Knew this would be a good place to ask such a question. The fine folks on this forum never disappoint. I also appreciate all the good luck wishes. The fiancée and I are going to give it a lot of thought and then discuss our final decision come the new year. We are both young (I'm 36, she's 29) so I don't think being a landlord would be too much of a hassle for us, but I have heard enough horror stories to make me reconsider even trying that... If I do go the landlord route, I already know a couple of people personally who would want to rent from me. My father says "Never rent to friends" though, so maybe I should take his advice... Decisions, decisions! I'm going to relax my mind, enjoy the holiday season, and then stress over this life decision in 2021. Thanks again, everyone! God bless.

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Find a way or make one.

NEITHER !
Stay in the Condo. Being a Home Owner gets to be a full time job. Repairs, painting, lawn care, property taxes, home owner's insurance, etc plus that monthly mortgage. As one gets older the above gets more and more difficult. Besides you already own the Condo. Those mortgage payments could be used instead for guns, shooting, and vacations.

My sister & BIL own some rentals. Good AND bad stories; too much hassle for me, though. One funny thing: one of their BAD tenants owns a P O S dual-wheel dump truck w/no parking brake. He had a load of black top delivered for a parking pad but never had it tamped down like BIL told him he should. He put a concrete block behind rear wheel. (It's on a slope; I don't know how he accomplished that feat.) A hot day the block sunk into the blacktop, but the tires didn't. YOU TUBE moment for sure. The truck ended up drifting down across the street and smashed the front of the house across the street. Sister & BIL's lawyer said they were not responsible, as did the local Magistrate, luckily for them. Also, since it was during the day, nobody was home in the now-condemned house. No one was hurt.

My mother bought a house for my brother. He moved his girl friend in. She had him thrown out and lived there many months, trashed the place and removed everything of value including family keepsakes. Of course never paid mom a nickel. Cost her over $5K and a lot of court dates to finally get rid of her. House was a disaster. Mom was paying the taxes and mortgage all through this. I arranged for my nephew to assume the mortgage and he fixed the place up nice, still lives there.

Oh, before mom bought the house I strongly encouraged her not to. She was convinced it would solve all my brothers problems.

I'd sell the condo. I don't like paying interest.

If you own it outright there is no way it would not positive cash flow a serious amount even if you hire a property management company to take care of it.
All investments have associated costs and risks.
You are in an excellent position to put some mailbox money in your pocket and let the property continue to appreciate at somebody else’s expense.
If you are a risk adverse person sell it and then wonder what may have been had you retained it. Not saying that to be critical of risk adverse people. It is just what I have seen several other people in your situation do after they liquidated an asset.

Hey you are young!
Do what makes you happy but do it smart.
If you have alot of equity in your condo you might want to do a 1031 exchange to skip capital gains tax.
If your HOA has sound finances and the reserve account has enough dough to cover future expenses without assessments,then that is something to appreciate. Ask the HOA president for an idea regarding future HOA dues increase due to increased fixed costs.
HOA can be a pain but if you think yours is mellow and livable then you might consider renting it assuming you are allowed to. Many HOA don't allow renting over 50% of units because banks frown on it and charge more for mortgages in those cases.
One nice thing about you living in the condo is that the money you don't spend on house maintenance can be spent travelling,camping,fun etc..
If you have kids,then get a house.
Maybe a large duplex where you live in one and rent the other.
All depends on the money math.
Ask your account!
(Don't ask me. Haha. LOL)

I may be in the same situation in some years with tons of equity.
Renters can be ok if you do the due diligence to screen them.
Penny wise pound foolish!
Don't rent for the sake of a quick buck. Rent to quality folk and be patient!
Lucky you w a fiancé!

I never wanted to be a landlord and right now is probably the worst possible time to stick your head in that noose. Folks all over the country have simply stopped paying rent and the landlords are screwed with few legal options/remedies. These are the same folks that took out student loans, got their degrees but now don't think they should have to pay the loans off... {I digress and don't get me started}.

In February I sold my late fathers condo in San Diego. Neither my sister nor I wanted it and the HOA had been a nightmare. For 3 years we rented it to my daughter and SIL {dad was in a nursing home} and they were good tenants but being a landlord is still a serious PITA...NEVER again.

I just sold my house in Tucson after 14+ years {should close escrow later this month}. The markets out here are all red hot. Wanted to move to the mountains and looked at 100 houses and 95 of them were "offer Pending".

When I found "The One" I jumped on it outbidding a low ball offer at $2,000 above the full asking price. The sellers loved that and when we went through the inevitable negotiations on a few repairs/upgrades I had the $2K in good will going for me and we ended up splitting a couple of grand in costs...win - win.

Our house in Tucson went full price with no contingencies and my proceeds will cover the cost of the new place making the move a zero sum event except for the actual moving costs. We loved the house in Tucson but the HOA Nazi's... not so much and I finally had had enough. Add in the miserable record breaking hot weather which has been getting worse for a couple of years and we knew it was time to go.

Now we are at 5,000' on a heavily treed .57 acre lot in Payson and loving every minute. Have not had a house payment for 16 years and can't imagine ever having one again. If the OP can live with the condo and HOA having a place paid off is awesome and I would stay put.

Our latest move was a 25% downsize which made sense for my bride and I {we are 70 and 69}and our monthly nut {taxes, insurance, utilities etc.} dropped by $400... again, win - win. Moving is a huge undertaking and not in a good way. I can't see us moving again... probably ever.

We had two houses because my wife and I worked in different locales. She got a decent retirement opportunity and we sold the house in the town where she worked (which was the first house we bought). We had been paying extra on both houses, and we got enough from selling the first house to pay off the second one within a few days of selling the first. The market, at least in that area, was really hot and we got a lot more than I expected before we looked into the market.

The amount saved monthly allowed us to pay off her car (a 2018), and as things stand we will pay off mine (a 2000) in a couple months. Cleaning out the first house and prepping it for sale was a pretty stressful miserable experience, but it was shown barely a month after we started emptying it and sold the same day.

The reduction in expenses was amazing, and I am concerned about the housing market having another crash ... so being out of the market is a a wonderful thing. We are going to pull a token amount of her pension to make sure we have enough flexibility to cover our insurance (my wife can buy through the state and continue with the same coverage we had until medicare time, and that's better coverage than what I can do at work for less money), but can live on my salary.

I'd bet you don't want to be a landlord - listen to the posters above. Most likely if you reap the cash out of your condo it will go a LONG way toward paying for your house.

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NHI, 10-8.

I would not trust the possibly new socialist take over. It maybe likely that the next govt will confiscate any surplus residences and turn same over to illegal aliens.

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"Don't Give Up the Ship"