Financial decisions about property ownership
April 17, 2012 9:10 AM Subscribe
How do we calculate whether to hold onto this property or sell it? Are there formulas for comparing renting at a loss against selling at a loss or ways to calculate the long term value of not selling an extra residence? As a side note: Is this what financial planners do?
posted by anonymous to Work & Money (7 answers total) 5 users marked this as a favorite
We (married, two professional incomes, no kids, late 40's) live in my husband's house, but we still own my condo in the same city, about two miles away. My condo (mortgage + association fees + insurance + taxes) is $1600/ month and my renter pays $1300/month for it. It's a one bed/one bath near public transportation and the lakefront in Chicago. Rent is on the low end of high rents in the neighborhood but we never have trouble finding a new tenant when the old one moves out. My only additional cost associated with being a landlord come from finding new tenants when old ones move out. All maintenance is handled by the building staff and is paid for by my association fees.
I bought it for about 190k, still owe about 183k. Mortgage is fixed at 6.25%. No major renovations to the place since before I bought it, so it's not one of the nicer units in the building, although all the lighting fixtures and ceiling fans are new. Honestly, it needs a new kitchen--the kitchen is totally functional (fridge is new, stove is 7ish years old), but the cabinets are ugly. That said, it's on a higher floor with an unobstructed view of Lake Michigan and the building itself is well-maintained and in a desirable neighborhood with amenities like a doorman, decks, dry cleaner on premises, et cetera. It's a beautiful building from 1924 with a gorgeous lobby and all those charming vintage features, including high ceilings, hardwood floors, and radiator heat.
At least 3 one-bedrooms in the building are currently on the market. My exact unit--two floors above with an expensively redone kitchen (it's the unit I did not buy when I bought mine--it has been more nicely restored than mine and I couldn't afford it when I bought) is listed at $226k. The owner did not sell it 6 years ago and has relisted it. Of the other two, one is a corner unit (slightly larger and different layout than mine) for $200; the other is at the back of the building (no lake view, slightly smaller) for $130,000.
Emotionally, I'm not ready to sell it, but I know that's irrational and not a good reason to hold on to it, if it makes financial sense to sell it. I can come to terms with not wanting to sell it, if we really should. But we need guidance in valuing the options of selling now or selling later or not selling at all.
If this is, in fact, what financial planners do, what does that cost? Do you know any in Chicago you can recommend?