UT Reader Asks: Should I Sell My Condo in DC?

by Shilpi Paul

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In this installment of UrbanTurf Reader Asks, a DC homeowner living in San Francisco inquires about the pros and cons of selling a property they own in DC.

In 2009, my husband and I bought a condo in Kalorama. Since then, we’ve moved to San Francisco, but have been holding on to our DC unit as a rental. The rent covers the mortgage, but doesn’t bring in a positive cash flow.

We don’t necessarily need the equity from selling the DC condo in order to buy a place in San Francisco, but are still weighing the pros and cons of selling. On one hand, there could be a benefit to holding onto the property for a few more years as it appreciates.

On the other, owning the condo takes up a certain amount of cognitive load, between managing tenants and dealing with various maintenance issues. Based on various DC market indicators, it also seems like a great time to sell right now.

I am curious to know what UrbanTurf readers think is the right decision. Are there any other factors that should tip our decision one way or the other?

Readers, what do you think? Post your thoughts in the comments section. If you would like to submit a question for UrbanTurf Reader Asks, send an email to .(JavaScript must be enabled to view this email address).

 

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This article originally published at http://dc.urbanturf.com/articles/blog/ut_reader_asks_i_live_in_sf._should_i_sell_my_condo_in_dc/7323

25 Comments

  1. marjorie said at 2:12 pm on Tuesday July 16, 2013:

    One option might be to let agents manage the property and leave it to appreciate.  DC is heading in a positive direction and Kalorama in particular is a great location.

  1. jack said at 2:27 pm on Tuesday July 16, 2013:

    I second Marjorie and would agree that the long term appreciation will greatly outweigh the mind space the unit is taking up and any management issues

  1. Dave said at 2:42 pm on Tuesday July 16, 2013:

    I didn’t want to be a landlord so I just sold my 1bdr Dupont condo. If you are selling under $400k, there is high demand in Dupont/Kalorama/AM. I just sold mine above asking, with multiple offers, and in less than a week.

  1. mona said at 2:45 pm on Tuesday July 16, 2013:

    I agree with Marjorie about letting a management company deal with it. I had a management company find new tenants for me recently and was shocked at how much they wanted to rent it for. I had it at a number that worked for me so wasn’t going to raise it that much. I laughed and told them best of luck trying to get that number. 2 wks later I was eating my words. You may be surprised about what a Kalorama place can rent for in this market and it may offset the expense of the management company.

  1. Katherine said at 2:54 pm on Tuesday July 16, 2013:

    My company, Attache Corporate Housing, specializes in short term furnished rentals. If you’re unsure about your plans, you can rent through us (as long as it’s fully furnished), and the short term leases allow you to have more flexibility. You avoid year commitments as such with unfurnished renters. Also, we are a full service management company so you do have to deal with any tenant issues. I hope this helps! http://www.StayAttache.com

  1. BDA said at 3:52 pm on Tuesday July 16, 2013:

    Sell now; the market is extremely strong for sellers. With interest rates rising, prices will go down. Low interest rates are subsidizing sellers in the DC market right now.  This won’t last.

  1. Gordon Gecko said at 3:53 pm on Tuesday July 16, 2013:

    Sell!

  1. saladman8283 said at 3:54 pm on Tuesday July 16, 2013:

    I would hold it if you don’t need the money right away.  Think long-term.  Once the place is paid off it could be a good source of retirement income and you will have paid for the condo with someone else’s money.  Plus you won’t pay capital gains as long as you hold it.

  1. SamF said at 4:11 pm on Tuesday July 16, 2013:

    DC has had a historical 2-4% increase in value every year. Don’t sell. Buy more units if anything.

  1. Gary Karr said at 4:28 pm on Tuesday July 16, 2013:

    Unless you will have a positive cash flow with the management fees, sell. I can’t imagine it’s worth the hassle to be an out-of-state landlord. What if a tenant decides to change the oil on his/her Harley in the living room. Being out of state, you are banking on the best case scenario: tenants pay, there’s no problem. But what if it’s not that? How will you deal with it?

  1. Jason said at 4:29 pm on Tuesday July 16, 2013:

    You may want to consider the tax implications of selling as well.  If you have lived in the condo for a certain number of years out of the past five (I believe it’s 2), you can sell the condo and the profit up to $250,000 (for a couple) won’t be taxed.  With that in mind, I would recommend holding on to the condo for now, but probably not past the un-taxed profit cut-off.

  1. DS said at 4:36 pm on Tuesday July 16, 2013:

    I just moved from DC to San Francisco. Sold my condo when I left and had the same debate you are having. In the end, I decided I didn’t want to deal with the mental energy and didn’t want to spend the $ on a manager (although I have used Attaché management,above, in the past and they are great if that is the route you choose).  I’m so glad I sold it. We proved it high ($600k+) and got multiple bids at asking in the first week. Closed within a month. Now I don’t have to deal. DC is generally a very strong market. But interest rates are rising which will decrease demand and suppress prices. Good luck!

  1. Juanita de Talmas said at 4:44 pm on Tuesday July 16, 2013:

    the profit up to $250,000 (for a couple) won’t be taxed.

    This is incorrect.  It’s $250,000 for an individual.  It’s $500,000 for a [married] couple.

  1. Ed Schneider said at 5:10 pm on Tuesday July 16, 2013:

    I don’t want to be the one who throws cold water on your rental decision, but there are particular difficulties with being a landlord in DC. In addition to the wear and tear a tenant may inflict on your property, when you do decide to sell, you’ll have to deal with DC’s notorious tenant-landlord laws which heavily tilt in favor of tenants. And because of DC’s Tenant Opportunity to Purchase Act (TOPA) of (as I recall) 1980, an intractable tenant may hold up a sale for as much as 180 days and not only cost you potential sales, but may have to be bought out of their lease with thousands of dollars in incentives out of your pocket. Plus, they have the right to sell their TOPA Right of First Refusal to another party which can jeopardize your potential sales even further. This doesn’t always happen, but there is always the possibility of a knowledgeable tenant taking advantage of your situation. I wish you the best in any case.

  1. smn-dc said at 5:24 pm on Tuesday July 16, 2013:

    I agree with most others. If you don’t need the cash now, hold on to it. That area of DC is particularly going to only got hotter.  And as saladman8283 noted, if you hold on to it long enough, the place will be paid off—and you’ll get rental income. Find a good mgmt. co. to handle the hassle if you don’t want to deal w/the maintenance issues.

  1. Colin said at 9:59 pm on Tuesday July 16, 2013:

    I’m in a similar situation except I am not out of state. Here are my thoughts: If we sell the place and used the money towards a down payment, we reduce our monthly payment by something like $360. If we keep it, we can probably make about $200 above our current mortgage payment plus condo fees. So, if we sell, we make an extra $160/month. Now, that doesn’t include appreciation (but also doesn’t include repairs/maintenance from renting and assumes the renter is really good). Ok, but I have to think, after the crazy appreciation lately—my 1BR has gone up about $75K based on comps in the past 4 years—how much room for appreciation is there? The place is already worth about $315K—are we going to start seeing small 1BRs in CoHi going for $350K? There has to be a limit. I dunno, even if you allow for some appreciation, it seems to come out a wash, in which case the hassle of being a landlord makes me think the best thing is to sell. Just my $.02.

  1. Jon said at 6:23 am on Wednesday July 17, 2013:

    Beware of the predictions that prices will only go up. That is a classic sign that the market is in a bubble. The only given when it comes to property is that the market is cyclical. Making your decision solely on the belief that prices will do nothing but rise is a huge mistake. We are at the top of the cycle. As Colin rightly points out, there’s a limit to how much people will pay for real estate and I think we’re starting to hit it. Folks who sell now will make good money and look like real estate geniuses down the road.

  1. zcf said at 9:58 am on Wednesday July 17, 2013:

    I’m going through the same conflict right now.  I’m trying to decide whether to make the move to southern California and what I should do with my place.  I’m thinking that in my field, I’ll eventually come back to DC, and I don’t want to be priced out of a city like New York or San Fran.

    Then again, dealing with tenants would be a pain. I might go the corporate housing / short term rental route.

  1. zcf said at 10:02 am on Wednesday July 17, 2013:

    Mona - what’s the name of that property management company??

  1. David said at 11:20 am on Wednesday July 17, 2013:

    Depending on the size of the condo it might not appreciate. In my opinion a studio or a one bedroom in Kalorama right now has probably reached its peak profitable appreciation - but will still rise marginally over the years. It won’t be anything drastic. People are looking for larger spaces as they are getting more settled in D.C. and having babies and getting married.

    Added to that condo fees and aging of the unit through use and normal wear and tear - when you do end up selling, it might take an additional investment to improve the home to selling stnadads. If it is not creating a positive cash flow I would suggest selling.

  1. Janson said at 12:29 pm on Wednesday July 17, 2013:

    From an investment perspective, many people make the mistake of ignoring real estate as they try to maintain an appropriate asset allocation across all their investments. Recognizing the immutable fact that the future, and future prices, are unknowable, what proportion of your total savings do you want in real estate (conventionally, 20% would be high)?  Remember also that a mortgage used to make an investment in real estate is a form of tax-subsidized leverage. Most people are uncomfortable using leverage to increase returns in other asset classes like stocks and bonds though both of those classes, over the medium turn, have historically beaten real estate returns handily.

  1. C said at 1:10 pm on Wednesday July 17, 2013:

    I just love answers like the one from Janson.

  1. Zesty said at 4:59 pm on Wednesday July 17, 2013:

    @Janson, I agree with your statement. Just one clarifying point; when the Real Estate market goes south, your bank can’t call you and demand you to put up an additional down-payment on your mortgage. But this is exactly what happens when you purchase stocks/bonds with leverage (margin call)...

  1. suggestion said at 5:12 pm on Wednesday July 17, 2013:

    One easy way to get a tenant that will pay - see if they are a federal employee or military.  Most wouldn’t risk their job/security clearance by not paying their rent.  Actually if in the military, you can even call up their commander and have their wages garnished (since they’re presumably getting a housing allowance)

  1. EliCash said at 8:28 am on Monday July 22, 2013:

    For those citing their neighborhood, Kalorama, as particularly heading in positive direction (and therefore hold) care to expand on that?

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