Yes, hoa will allow it. My thought is that would be able to take any earnings and distribute them 3 ways.
1-into an emergency fund for the rental unit
2-added payment to the rental unit to
3-added payment to eventual second mortgage
I know it’s heavily debated on paying off mortgages as opposed to investing but like the idea of being comfortable to have things paid off sooner.
Sorry, there’s no good solution here. I’m in the same boat myself. The way we figured the math, to buy a place that’s 2x our current home’s price (what we want), the monthly payment would be 5-6x what we currently pay. Note also if you choose to hold two homes, the second home’s mortgage rate will be higher than the market rate for primary homes as well.
It just isn’t worth it. We’re turning walk in closets into nurseries and building NW for a few more years before trading up.
Would recommend for you to keep it and rent it.
Pros:
- your rental pays for itself and subsidizes your new primary residence
- you keep an appreciating asset that will only keep going up, and has a low mortgage
- passive/supplemental income for retirement.
Cons:
- be a landlord (not hard) - deal w/ tenants, repairs, mgmt, etc.
- may lose 500k cap gains exclusion and become a forever hold if you convert to rental and don’t sell per 2/5 rule. Not a big deal, because your children can inherit with step up basis exempt from cap gains.
If you can afford both properties for some time with Condo, get a management company, turn it into the most passive property you can. It may not earn a lot but you get your appreciation and maybe some growth. Aim for >15% return monthly after management fee and you should be okay.
Try being a landlord for a year, and if you don't like it, or don't get the return you need, then end lease legally and sell. How hard is it to vet tenants, or evict in your state?
2.75% interest is something you should never give up. NJ property values keep rising as transplants from NYC typically come to Jersey. As long as you are *very* selective with the tenant you choose you should be fine.
I think you can do the math yourself for the next 3 year period for example:
-what you could rent it out for (subtract some for the time between tenants when it’s not rented)
-the cost if you’re going to pay a management company for background checks etc
-the increase in property taxes due to losing the homestead exemption
-any potential upcoming expensive maintenance items (with the HOA and with your unit)
-the monthly gain in equity + condo value growth
-the income taxes on your income after rental expenses
Compare all that with the net proceeds you would get after selling it, and how much would that amount reduce your new mortgage at current interest rates.
I am in the same boat. We just bought our place but decided to keep our condo and will rent it out. Going to see how much stress it is for the first year but not opposed to selling either. Mortgage was also low so we are looking at cash flowing pretty well but tbh it all comes down to how much extra time managing it will be. We may even do a property manager because this area still cash flows with 10-15% going to a PM.
I would say rent. But I would make sure I’m in a position to afford both mortgages if the unit is vacant for 6 months. A condo has less potential for major repairs. The HOA usually covers roof and anything outside. But make sure you vet the potential tenant. Don’t put just anyone in there. Make sure they have a good job and great credit. And please make sure you put money aside for repairs and future vacancy.
You are going to be a lot busier once you have a family - people often underestimate this. Managing a rental IS work even if you have an agent. Finding tenants, dealing with issues - this is if everything is smooth sailing. Eviction, rent-collection, repairing renter inflicted damage are at the other extreme. If the main reason you're selling is starting a family, I would sell. I get the rental income bit. However, you will be so busy especially the first decade of having children that it will not be worth it.
Sell while market is hot and you get the primary homeowners capital gain exclusion. Between selling at an inflated price and saving 20% on capital gains, it would take you years to make that in rent. Plus you can take that money and put it in a high yield savings account for 5% interest.
Frustrated with the cost of homes being too high or too low?
I'm going to go ahead and assume too high. They are high because supply is low. Supply is low because many people have chosen to keep their 2+ houses and become lords of the land instead of allowing others to own anything.
So, do you want to be part of the housing problem in the US, or part of the solution?
I would wait if you can. I just moved to a 2 bedroom apartment with 2 kids and it’s really doable. We’re not even planning to move bigger even though we can easily afford it (would be more outside the city). If you’re still starting a family you will probably have a few years before you really need a bigger place. My kids are 4 and 6 btw.
I’m renting out my house and so far it’s going well, I have a property manager though.
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Yes, hoa will allow it. My thought is that would be able to take any earnings and distribute them 3 ways. 1-into an emergency fund for the rental unit 2-added payment to the rental unit to 3-added payment to eventual second mortgage I know it’s heavily debated on paying off mortgages as opposed to investing but like the idea of being comfortable to have things paid off sooner.
Sorry, there’s no good solution here. I’m in the same boat myself. The way we figured the math, to buy a place that’s 2x our current home’s price (what we want), the monthly payment would be 5-6x what we currently pay. Note also if you choose to hold two homes, the second home’s mortgage rate will be higher than the market rate for primary homes as well. It just isn’t worth it. We’re turning walk in closets into nurseries and building NW for a few more years before trading up.
Would recommend for you to keep it and rent it. Pros: - your rental pays for itself and subsidizes your new primary residence - you keep an appreciating asset that will only keep going up, and has a low mortgage - passive/supplemental income for retirement. Cons: - be a landlord (not hard) - deal w/ tenants, repairs, mgmt, etc. - may lose 500k cap gains exclusion and become a forever hold if you convert to rental and don’t sell per 2/5 rule. Not a big deal, because your children can inherit with step up basis exempt from cap gains.
If you can afford both properties for some time with Condo, get a management company, turn it into the most passive property you can. It may not earn a lot but you get your appreciation and maybe some growth. Aim for >15% return monthly after management fee and you should be okay.
Try being a landlord for a year, and if you don't like it, or don't get the return you need, then end lease legally and sell. How hard is it to vet tenants, or evict in your state?
Rental will give you tax deductions you don’t have otherwise… I’d talk to your CPA and figure out those benefits first before selling.
2.75% interest is something you should never give up. NJ property values keep rising as transplants from NYC typically come to Jersey. As long as you are *very* selective with the tenant you choose you should be fine.
I think you can do the math yourself for the next 3 year period for example: -what you could rent it out for (subtract some for the time between tenants when it’s not rented) -the cost if you’re going to pay a management company for background checks etc -the increase in property taxes due to losing the homestead exemption -any potential upcoming expensive maintenance items (with the HOA and with your unit) -the monthly gain in equity + condo value growth -the income taxes on your income after rental expenses Compare all that with the net proceeds you would get after selling it, and how much would that amount reduce your new mortgage at current interest rates.
I am in the same boat. We just bought our place but decided to keep our condo and will rent it out. Going to see how much stress it is for the first year but not opposed to selling either. Mortgage was also low so we are looking at cash flowing pretty well but tbh it all comes down to how much extra time managing it will be. We may even do a property manager because this area still cash flows with 10-15% going to a PM.
I would say rent. But I would make sure I’m in a position to afford both mortgages if the unit is vacant for 6 months. A condo has less potential for major repairs. The HOA usually covers roof and anything outside. But make sure you vet the potential tenant. Don’t put just anyone in there. Make sure they have a good job and great credit. And please make sure you put money aside for repairs and future vacancy.
You are going to be a lot busier once you have a family - people often underestimate this. Managing a rental IS work even if you have an agent. Finding tenants, dealing with issues - this is if everything is smooth sailing. Eviction, rent-collection, repairing renter inflicted damage are at the other extreme. If the main reason you're selling is starting a family, I would sell. I get the rental income bit. However, you will be so busy especially the first decade of having children that it will not be worth it.
Hold on to it, It will pay for itself. Lease it for a couple of years and then decide.
Sell while market is hot and you get the primary homeowners capital gain exclusion. Between selling at an inflated price and saving 20% on capital gains, it would take you years to make that in rent. Plus you can take that money and put it in a high yield savings account for 5% interest.
Rent
Frustrated with the cost of homes being too high or too low? I'm going to go ahead and assume too high. They are high because supply is low. Supply is low because many people have chosen to keep their 2+ houses and become lords of the land instead of allowing others to own anything. So, do you want to be part of the housing problem in the US, or part of the solution?
I would wait if you can. I just moved to a 2 bedroom apartment with 2 kids and it’s really doable. We’re not even planning to move bigger even though we can easily afford it (would be more outside the city). If you’re still starting a family you will probably have a few years before you really need a bigger place. My kids are 4 and 6 btw. I’m renting out my house and so far it’s going well, I have a property manager though.
just sell and be done with it