Real Estate advice wanted.

[StephenWhoDat]

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.

 

[mike from st pete]

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.

 

[Onomea]

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!

 

[mtgianni]

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

 

[Pisgah]

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.

 

[Camster]

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.

 

[Bekeart]

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

 

[StephenWhoDat]

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!

This sounds like solid advice for sure. Much appreciated.

 

[THE PILGRIM]

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.

 

[s&wchad]

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.

 

[jeffsmith]

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

 

[yaktamer]

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.

 

[Nevada Ed]

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.

 

[arjay]

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

 

[ggibson511960]

Sell It

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.

 

[Baggy Wrinkle]

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.

 

[MRB1]

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.

 

[rwsmith]

I'm in the opposite boat...

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.

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.

 

[brucev]

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.

 

[rustythread]

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.