Dump that dump?

October 10, 2012 2:32 PM

How do I know it is time to get rid of a rental condominium I own?

I purchased my condominium in 2005. 3bedroom. 2.5 baths, 1400sqft. $150,000. It’s a nice place in a decent part of town. I currently still owe $126,000. I refinanced it in 2011 from 6.5% to 4.128%.

My tax documents have shown its value estimated at $100,000 and for the first time on Zillow today I found the same condo floor plan in the complex for $150,0000. (I know these estimates tend to be a bit on the high side).

I live abroad and only kept the condo only because the market conditions and prices have been so bad. I don’t see the condo market or the property value increasing significantly for many, many years.

I have had a renter for the last three years and have worked with property management firm taking 10%. The renter is a bit high maintainance and calls pretty frequently for repairs. The property management usually sends out a repair guy for a minimum bill of $180. ($240 just to change out the internal workings of a running toilet. A $20 part). This has happened 3 to 4 times each year for the last three years.

Through the property management and repairs I am losing about $2000 annually. (Yes I have been renting for less than the cost of my mortgage payments. It has worked in my favor due to international cost of living differences).

This weekend I found out the heater was not working. (A potentially expensive repair and just a pain in the butt).
I don’t plan on living there again in the future. Its bigger than I need and in a part of town I don’t really care for too much.
It’s really just an annoyance that costs me several hundred dollars each month.

If I can sell it at just around the remaining loan balance should I do so? I know it would be a big long term loss but I don’t see the investment turning around an the near or even mid-term future. I feel like I’m throwing good money after bad along with a lot of other headaches.

posted by anonymous to work & money (3 answers total)

If you didn't own it, would you buy it?

Any time you can sell something and you don't, you are buying it at that price.
posted by bensherman at 2:36 PM on October 10, 2012 [6 favorites]

I'd sell it. You're losing money every month and you're putting in some significant money in repairs, upkeep, etc. What if the condo fees go up, or heaven preserve you, you get assessed for something? You are one repairman's opinion away from financial catastrophe.

I'd sell it at a loss to get rid of the headache.

Find a good, no-bullshit, realtor who will tell you exactly what your condo will bring on the open market. THEN decide if now is the time to sell. Price it a hair under market value and move on!

Two best days of your condo owning life: The day you buy it and the day you sell it.
posted by Ruthless Bunny at 2:37 PM on October 10, 2012 [2 favorites]

If I can sell it at just around the remaining loan balance should I do so? I know it would be a big long term loss...

I'd say absolutely yes. Don't define "at a loss" so stringently, reframe the picture, take ht money and run.

You've been losing money ($2000/yr) renting it for 3 years, so if you wanted to "make your money back", you'd have to sell not for $150,000 but for $156,000. If you wait another 5 years for the market prices to rise (back to the $150k you bought it at) that's another $10,000 in rental losses, and now you'd need it to sell for $166k to "make your money back". See how this is getting ridiculous? There's really no way to come out ahead in the big picture, so maybe you should take a deep breath and figure out what "at a loss" really means to you.

You've defined "sell it for $150k because that's what the price was when I bought it" as your break-even point, and you feel bad about selling if you can't meet that expectation. At this point in market history, many people define the break-even point as "I don't have to pay the bank extra money to stop owning".

If you can find somebody willing to buy at a price around the remaining loan balance, SELL. In fact, sell, and throw a "not my problem any more" party.
posted by aimedwander at 6:57 AM on October 11, 2012 [1 favorite]