Kind of a math problem for anyone inclined to weigh in: Co-op, purchased for $525,000 about 3 years ago. Initial transaction costs were $13,000. Additional $12,000 in assessments and renovations. Current equity is about $200,000. Monthly gross costs (mortgage+maintenance) are $2800. Monthly net costs (minus principal+tax deduction) are $1700. Co-op has a sublet fee on a rising scale. It starts at... [more]
Kind of a math problem for anyone inclined to weigh in:
Co-op, purchased for $525,000 about 3 years ago.
Initial transaction costs were $13,000.
Additional $12,000 in assessments and renovations.
Current equity is about $200,000.
Monthly gross costs (mortgage+maintenance) are $2800.
Monthly net costs (minus principal+tax deduction) are $1700.
Co-op has a sublet fee on a rising scale. It starts at $350.
Broker notes equivalent unit rented for $3200, but that was renovated -- and took a six months to find a tenant. She estimates $2800 for this one.
So carrying costs are $2050 but future assessment charges may reduce that gain of $750.
Broker says I have a good chance of selling at $550K, but with broker fees, it will be a roughly $10K loss.
Net worth is roughly $1.3M if that affects your guidance. I’m leaving NYC for another city, hopefully permanently, where I'll rent, but few other places have felt like home to me so I may return.
What would you do?
[less]
Response by 300_mercer
about 7 years ago
Posts: 10570
Member since: Feb 2007
If you like the apartment and there is a good chance that you will come back and actually live in the apartment, I wouldn’t sell. However, you mention that the apartment is not renovated suggesting you may not have special attachment to this apartment. I would rent out for a year or two, sell after ensuring that you like the other city. Or even better, offer for rent and sale.
Ignored comment.
Unhide
Response by front_porch
about 7 years ago
Posts: 5316
Member since: Mar 2008
To the extent that this is a personal finance problem, whether you are 30 years old or 50 years old (in other words, where you are in earning-power cycle), and what your income will be at the new job (how the losses measure up against income), makes a difference.
However, I will weigh in on the brokerage side: whatever it is, it's unlikely that if you purchased for $525K three years ago, and put in less than $12K in renovations (since you say some of that was assessments) that you're getting out at $550K. It's possible, since the one-bedroom niche has held up better than most, but I'd say, sight unseen, that $525K is more likely. Similarly, in a world where you can rent a one-bedroom in a doorman building with a small gym for $3K, the idea that $2800 is enough of a discount to make a tenant do co-op paperwork is perhaps optimistic.
ali r.
{upstairs realty}
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
about 7 years ago
Posts: 9877
Member since: Mar 2009
When you say monthly net costs are $1700, have you spoken to your accountant about that? Once you turn the unit into an investment property instead of your primary residence things change.
Ignored comment.
Unhide
Response by deanc
about 7 years ago
Posts: 407
Member since: Jun 2006
I agree.....we have a similar quandary here in Brooklyn Heights, do we rent out our 2bed/2bath apartment for the next 3-4 years while we work in another state.....or do we sell in a down market?
Im just not 100% sure we will come back to NY after this posting, and not sure I want the hassle of dealing with a renter while we live in another state for the next few years.......
Ignored comment.
Unhide
Response by TeamM
about 7 years ago
Posts: 314
Member since: Jan 2017
I think there are too many other factors that are particular to your own situation to offer advice in the abstract. For examples: If you sell, what will you do with the money? Do you want to deal with the aggravation of tenants? Is it practical that you'd ever live there again?
Ignored comment.
Unhide
Response by crescent22
about 7 years ago
Posts: 953
Member since: Apr 2008
Forgetting about how you finance it, assuming your maintenance only is $1400/mo, your cap rate of (2800-1400) = 1400 annualized divided by the base value of 525,000 is 3.2%. This is not unusual for NYC but nonetheless a crummy rate for an illiquid taxable asset. Once the coop fee is taken out, then the rate drops to $1050/mo or a cap rate of 2.4%. You can get these rates in the Treasury market. I would sell.
'/%3e%3c/g%3e%3c/svg%3e)
If you like the apartment and there is a good chance that you will come back and actually live in the apartment, I wouldn’t sell. However, you mention that the apartment is not renovated suggesting you may not have special attachment to this apartment. I would rent out for a year or two, sell after ensuring that you like the other city. Or even better, offer for rent and sale.
To the extent that this is a personal finance problem, whether you are 30 years old or 50 years old (in other words, where you are in earning-power cycle), and what your income will be at the new job (how the losses measure up against income), makes a difference.
However, I will weigh in on the brokerage side: whatever it is, it's unlikely that if you purchased for $525K three years ago, and put in less than $12K in renovations (since you say some of that was assessments) that you're getting out at $550K. It's possible, since the one-bedroom niche has held up better than most, but I'd say, sight unseen, that $525K is more likely. Similarly, in a world where you can rent a one-bedroom in a doorman building with a small gym for $3K, the idea that $2800 is enough of a discount to make a tenant do co-op paperwork is perhaps optimistic.
ali r.
{upstairs realty}
When you say monthly net costs are $1700, have you spoken to your accountant about that? Once you turn the unit into an investment property instead of your primary residence things change.
I agree.....we have a similar quandary here in Brooklyn Heights, do we rent out our 2bed/2bath apartment for the next 3-4 years while we work in another state.....or do we sell in a down market?
Im just not 100% sure we will come back to NY after this posting, and not sure I want the hassle of dealing with a renter while we live in another state for the next few years.......
I think there are too many other factors that are particular to your own situation to offer advice in the abstract. For examples: If you sell, what will you do with the money? Do you want to deal with the aggravation of tenants? Is it practical that you'd ever live there again?
Forgetting about how you finance it, assuming your maintenance only is $1400/mo, your cap rate of (2800-1400) = 1400 annualized divided by the base value of 525,000 is 3.2%. This is not unusual for NYC but nonetheless a crummy rate for an illiquid taxable asset. Once the coop fee is taken out, then the rate drops to $1050/mo or a cap rate of 2.4%. You can get these rates in the Treasury market. I would sell.