I tend to agree with Ed that if after looking at all your financial situation and you have decided you can afford the new mortgage and maintain the living standard you would like to have, then go ahead and keep the condo.
However, I would suggest you do a more detailed evaluation other than just the rental income and mortgage. In your model, you will want to consider the HOA fee, property management fee if you decide to use a property management company, maintenance expense, vacancy rate allowance, utilitiy fee if it is customary for you to pay utility around your area, property Tax on both home, both mortgages, the two mortgages, insurance and such. Perhaps the interest rate on your condo loan is also very favorable?
I personally favor investment properties as property value eventually go up if it's in a desirable area; just want to make sure you are not taking on too much that you don't want to take on.
You have some very helpful answers. Just a few more thoughts:
My wife and I became "accidental real estate investors" in a situation similar to yours.
First, I suggest that you run your proposal by a local CPA that can share with you the tax consequences.
Second, I suggest a great book 'The Millionaire Real Estate Investor: by Gary Keller, Dave Jenks, and Jay Papasan. It was on the NY Times best seller list, very good advice for investors.
Third, I think this good be an excellent way for you to create some additional income, both long and short term.
One thing to remember, though: you must pay tax to the IRS on your rental income. But, the good news is that there are expenses that you may deduct on your tax return, too, like: interest, maintenance, depreciation, losses, etc. These deductions will reduce the amount of rental income, so don't forget to keep track of those!
Good luck - lucky you that the rentals in your market will cover your operating costs. What a great opportunity for you to hold on to an appreciating asset!
If you are financially in a position to rent the condo I would suggest you rent. With prices working against the seller right now, it would seem like a good idea to hold on to it if you can and sell if you are ready when the market stabilizes. Carrie
You received GREAT answers from Ed and Sylvia. I tend to agree that if you can afford the new home without selling the condo, keep it. If only for the short term (say another 2-3 years) until the market picks up a bit. If the condo was your primary residence, when you do sell it, if you have lived in it for at least two of the five proceeding years before the sale, you can still have some tax exempt income (profit) from the sale. Also consider the risks and headaches of being a landlord--it may not be worth it to you personally (maybe you're handy--maybe not). When figuring out your financial bottom line for the condo, be sure to leave a cushion for "vacancy rate"--those times between tenants when you'll have no income from the property. The ideas here are a very good start; but you need to speak to a local REALTOR with residential investment experience and go over the specifics. He/she will help you develop a long term plan. Best of luck and happy hunting!
1. You want to sell it because you sounds you made some good appreciation, and within 5 years you have to live there 2 years to get tax FREE capital gain. If you wait, you may pass the time and not qualified, also if Democrat won the president as it looks like, this tax advantage may be gone.
2. Edison 2br 2ba condo is very easy to sale and the price not much change, unlike all other area that other realtors represent. Their area 2br 2ba condo may be soft, but NOT Edison.
3. For example, if your 2br 2ba condo is at Edison Hollow South http://raspberryct.blogspot.com/ which is SOLD OUT, your 2br 2ba would help some first time buyer's American Dream come true. All you need to do is hold an open house and get Jose 732 979-9100 (cell) to deliver 1,000 invitation flyers to prospective buyer communities such as Edison/Blueberry Village Apt (rented out), Rivendell Apt (rented out) ...etc.
4. Venu sold his 2br 2ba condo at EHS in 2007 and bought a 3br townhouse at Edison Manor and take the advantage of Tax Free capital gain, same as Kelly who sold her 2br 2ba condo and bought a $650k house in Edison. They all sold their units in one or two open house buy getting 1,000 flyers to the apartment complex, sulekha.com and craigslist.
Of course, if you want to keep the 2br 2ba condo, rental in Edison/Piscataway area is also very easy; Jimmy just bought a 2br 2ba condo at Woodhaven http://woodhavenatedison.blogspot.com/ for investment and rented at $1,650. Teck bought 3 more 2br 2ba condo at Maple Woods http://maplewoodsatpiscataway.blogspot.com/ and one I know rented it to a Johnson Johnson employee for $1,900.