It is natural to outgrow your first Boston condo. Your family gets bigger, you get a better job or maybe you just want to move. Whatever the reason, it is a dilemma that all Boston condo homeowners eventually face. Before making the plunge into a new Boston luxury condo, there is an important question you need to settle. Should you sell your current Beacon Hill condominium or keep it as a rental Beacon Hill rental property? Your answer will depend on what you want to do and what you are ready to take on as a homeowner.
This post will go over some of the factors you should consider in making your decision.
Being a Boston Condo Landlord
Yes, you get to be the landlord this time. Do you remember how difficult you were? Okay, probably not, but no matter how good you are at screening potential tenants, there is a chance you will get a nightmare tenant who complains all the time, manages to destroy your property and skip out on the final payments without notice.
If you are the landlord, it is your responsibility. You need to fix the plumbing or find someone to fix it for you. You need to provide the appliances, replace the lightbulbs and clean the apartment between tenants. Being a landlord is a big job. It isn’t just about the time, it’s about the money too. Unless you are one of the last remaining jack-of-all-trades, you will need enough cash on hand to pay electricians, contractors and plumbers. Also, you may want to consult a lawyer to help you draft leases and, in California, evict people.
Of course, you always have the option of working with a proprty manager if you do not want to take on these responsibilities.
Boston Condo Mortgage
Are you still paying down the mortgage on the first Boston condominium? If you are, that means you will have to finance two mortgages. But wait, you’re thinking, you will be able to collect rent on the other property. Yes, but not at first. You will need to convert it, list it, screen tenants and decide on a move-in date. It could take weeks before you get your first tenants. In the time before you do, you will need to finance the loan on your own. Also, what happens if your tenant leaves? You will need cash to set up the property and to finance it when you cannot find a tenant. Also, keep in mind that the rents you collect need to cover the mortgage and repairs-so you may lose money the first few months while you calibrate.
The new Boston Luxury Condo
How are you purchasing the second Boston luxury condo? Most people use the proceeds from the sale of their first home to finance the purchase of the second. Unless you managed to save for another down payment, using the sale of your current home to cover the down-payment is probably your only option.
Finally, the current tax laws allow you to exclude some of the income from the sale of your home. The amounts depend on if you are married or not. But, the tax savings could be immense and could go a long way toward putting you on a strong financial footing on your new home.
In short, if you sell your current home to finance the purchase of your new home, you could be placed in a much stronger financial position. Don’t you remember the first time you bought a house? You were probably treading water financially for months as you rebalanced your budget. But if you sell and buy, you could emerge financially stronger and more stable. You might even have enough left over to take a nice vacation. But, if you decide to keep the property and rent it, make sure you account for all possible expenses. You will not have the fungibility you would if you had sold, so make sure you have enough to weather the lean months.
Blog idea from Realtor.com
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