[USER]

Sell or keep our rental?
My partner and I bought a condo in Orange County, CA in 2019. We have about $285k in equity and our interest rate on the mortgage is 2.447%.

Our family outgrew the condo so we started renting it out July 2024 and we are currently renting a single family home nearby for $3,750 per month.

Condo Renting Stats:
· Renting it out for $2,650 per month
· “Profiting” $346 per month after considering PITI+HOA+taxes

Concerns/considerations:
· Losing out on 2/5 years IRS exclusion to sell the property without paying capital gains tax if we decide to sell down the road
· Concerned with having a bad tenant in the future
· We want to buy a single family home in the near future (2-5 years) and homes in the area are $1M+

Current Financial Picture:
· $285k in equity from the condo
· $300k cash/taxable brokerage
· $245k in retirement accounts
· Average net income per month: $14k

We’ve been going back and forth about what is the best decision. What would you do if you were in our shoes?

Is it better to hold the condo long term or to sell and maybe invest the money while we continue to save for our forever home?

[Scott]

You will have ample real estate exposure when you buy your forever home and the expiry of the tax-free gain looms on the current condo.

Personally, I would cash out the condo while it is tax free, get the forever home, and decide after that if you want to be in the real estate business or in the VTI and chill business.

You could always purchase another investment property in the future if you choose that path.

Probably better to find a deliberate landlord property than sort of the accidental landlord you are now.

[Jamie]

Sell. I don’t see how this has much profit after you factor in maintenence.

[Rick]

Rough rule of thumb is to set aside 20% of gross rent for true long term landlord expenses.

Things like maintenance, short term repairs, long term repairs, vacancy allowance, property management allowance, relisting and marketing costs, funding the common poorly timed increases in property tax and landlord insurance vs when you can raise rent, etc etc.

And those are mostly for good tenants. A bad tenant can wipe that money out quick.

That is not to say being a landlord is bad. But being a landlord losing money, which I expect you are after the 20% gross rent set aside for above expenses, that is bad.

I would sell, get the cap gains deduction that is allowed, and put it all behind you looking instead forward to your future plans.

[Jason]

Simple. Do you WANT to be a landlord? It’s not for me. ‘Forget the cheese, let me out of the trap’.

I’d take the equity and use it for a down payment on the next place.

[Christina]

Sell! Take the cap gains tax exemption and move on. I was a landlord in Socal and all it took is one bad tenant to ruin 20 years of good experiences.

The tenant laws are too one-sided.

[Cate]

Sell. Even if you want to be a landlord, buy a townhome or single family home instead.

They appreciate more in value than condo.

[Author]

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