renting out vs selling a property

[desert monk]

I am seriously thinking of selling my condo and buying a house in a burgeoning area that should explode in size over the next ten years. I have a condo in the city I am in, where the real estate prices are very high and have probably peaked for the most part (they are overvalued in my estimation and are vulnerable to a "correction" ... though not necessarily a "crash," despite the fact that the area is continuing to grow as well).

I spoke with a friend about this, and he suggested that I rent my place out and keep paying it off while I purchase the house in the new area (which I will live in) at the same time. My city has a very low vacancy rate, and finding a renter would be easy. OTOH, I do not expect housing prices to expand much over the next 5 years (if anything, they will be going down). I am wondering if renting would be worth the hassle.

My other option if I do choose to rent it is to use a property management company to look after it. I have only known one person who used this, and he claimed that they bled him dry (though this was for a house, where much more personal expense could be incurred than in a condo situation).

Any advice on this conundrum?

 

[HOCKEY_GOD]

Seek a financial advisor whom you are comfortable with divulging your entire financial profile. It's difficult to give you advice without weighing in on a number of factors, such as: your net worth, your net income, the mortgage you are carrying on both places and upcoming major future expenses. Anybody that makes a snap judgement on what you should do without examining everything is not being prudent in giving you advice.

 

[elassowipo1]

Intuitively, if the % yield on the condo is greater than the cost of capital for your new home, it would be advantageous to keep the condo.

As for property management expenses, on average I'm currently paying about 7% of gross revenues for my out of town residential properties. This will vary depending on the type of location and property but you should probably expect something between the high single digits and 10%.

 

[Ceiling Cat]

You have said yourself that you expect property values to go down, I will concur that this will probably happen as we are going into a period of change. Many European countries are in deep financial trouble and the US is not in good shape. The property values have already plummeted south of the border. You can expect that the value of your condo will be worth less. Sell while the selling is good, put the money towards your new place. I have talked to many land lords and they are all sick and tired of the shenanigans of their tenants. I am none too pleased with them either. Being a landlord is a hard way to make a few bucks these days. Bad tenants can wreck your property and make it less desirable. I would sell the condo and put the money towards the new property.

 

[Danolo]

Renting is a pain in the ass....

Evicting someone is a lengthy process and for a determined non-payer, almost a guarantee of 3 -6 months free rent.

Maintenance, insurance, taxes, damage, skips, non payment,...

Sell it... Just my 2 cents

 

[tough sac]

I own rentals, the tax on the income is rediculous, they consider it non active income and you are taxed close to 50%. Talk to your accountant.

Sell

 

[Brandon123]

Rich people make money work for them, poor people work for money. Rent your condo.

 

[Nickelodeon]

There are complex answers to your question and simple answers. A simple answer is that you don't want to be over-invested in one class of investments. This would rule out two properties from the get go. Talk to a trusted financial advisor.

 

[harryass]

I know a few folks that own rentals. A pain to deal with 24/7 if you end up with renters who don't pay rent on time and who don't give a shit about looking after the place.

 

[gymbum1]

The biggest thing is where do you think the market is headed, up or down. Have we peaked with interest rates going up will prices decline even with the economy in recovery. When I watch bbn and they mention our housing market at 5 to 6 times the average income and traditionally its at 3.5 thats worry some.

 

[PurpleMonkey]

I am seriously thinking of selling my condo and buying a house in a burgeoning area that should explode in size over the next ten years....... I am wondering if renting would be worth the hassle.

You answered your own question. Your first sentence was that you were seriously thinking of selling your condo. Later you are debating if renting would be troublesome. Go with your instict, I know you know the right answer.

But ask yourself this, what good would the burgeoning area that should explode in size over the next ten years be when your condo is not giving you back as much return (and more headaches) as well as holding up your liquidity? Just a thought.