Need Opinions On Condo Sale

[rubiks]

Hi All.

I'm not sure if we should sell our house and move or stay put and could really use some perspective.

Here is some background.

Five years ago a "friend" sold us their condo. Being only 23 at the time we naively agreed to pay our friend what they owed on their mortgage which was ~240K when what we should have paid was ~220K. On top of that we had to take out mortgage insurance through CMHC (Canada) which added even more to our mortgage. Needless to say looking back this was a huge mistake that we are still paying for.

Since then we've worked on paying off almost all of our debt except a car loan and saving as much as possible. We are currently saving at a rate of 2K / month right now which is about 30% of our monthly after tax income. We have savings totalling about 55K right now. About 12K of that is tied up in RRSP's (think 401K) while the rest is cash.

The problem is we want to sell the condo and move back to where we came from for a few reasons.

1) Closer to family. They are about 8 hours away right now.
2) Back to a more rural life. Living so close to over a million people isn't want we want anymore.
3) Housing is much cheaper where we want to go compared to here.

I can do my job remotely so that isn't an issue and my wife is a stay at home mom.

The biggest part of the problem with moving now is that we still owe 232K on the condo and the market value is probably 215K. After paying realtor fees we would probably have a 30K shortfall on the sale of the condo.

I think we have three options.

1) Stay put. This is probably the smartest but life is so short to keep putting things off for another few years over and over.
2) Rent the condo out and just rent a place where we want to live. This might work but rent would only cover about 80% of the mortgage/taxes/etc. I'm also hesitant of having this stress added to my life.
3) Sell it, take a loss and live and learn. After this we'd just rent for a few years and save up until we had at least 20% down for the next house.

What would you do? Any advice is welcome.

[disneysteve]

I think you need to compare the loss if you rent to the loss if you sell. In other words, how much will you have to pay out of pocket each month to cover the difference between expenses and rent? How long would you have to do that to add up to the $30,000 you'd lose if you sold? If it's going to cost you $500/month to rent the place, that means you could do that for 60 months before you'd spend what you'd spend if you sold it now. What are the chances that during that time, the value will climb to the break even point between rising property values and paying down the debt? I'd think those odds are pretty good.

Renting is probably the better deal financially speaking. You just need to deal with being a long distance landlord which can be tough. Find yourself a good property management company to handle everything for you so that you aren't stuck dealing with everything.

[snafu]

Location is all important when evaluating real estate. Have you had the condo reviewed by a realtor? I suggest asking for a print-out of 4 months of 'solds,' with cost broken out by sf. I wonder what major city faces a reduction of property value leaving owners underwater. I'm sure you were surprised to discover after 5 years of substantial monthly payments for mortgage, taxes, condo fees, insurance and mortgage insurance, very little has been applied to principal.

What is the outlook for real estate 12 months out in your region?

[MonkeyMama]

I think either option is fine. Just depends what your priorities are. I don't think #3 is a bad option given your age. Just take the loss and move on with your life. Is what I would probably be tempted to do. Life is short, you have the cash, so move on. (We are fairly fiscally conservative, but we also believe in being happy and avoiding hassles, as long as we have the means to).

[rubiks]

Thanks for the feedback everyone.

Steve you've got a good point in looking at it like that. Currently our amortization has us paying off about 6.5K / year and even if the property values go up by just 10K over two years that'd save us quite a bit of money.

As for finding comparable deals and figuring out the twelve month projection of the market that's tough. Our area of the province was hit by pretty major flooding last summer so the market is soft in our town right now and nobody really knows what's going to happen as far as real estate goes.

[scfr]

What percentage of equity would you need to have in the condo to eliminate the mortgage insurance?

How much is the outstanding car loan, and is that your only debt other than the mortgage?

[rubiks]

In Canada you need at least 20% down in order to not have to buy CMHC insurance. The premium was tacked onto the mortgage has already been paid off.

The car loan is about 25K with an approximate 4% interest rate.

Other then the car and mortgage we have no other debts.

[snafu]

If you're in High River you have an added problem. Have condos been put on the market in your complex? Have you talked to an experienced, local realtor? What discounts are being offered for perception? It's such a lovely community with so many benefits, it will most certainly recover once the unique situation is resolved. Personally, I'd be inviting family to come for extended visits rather than move. Can you pick up extra work to boost savings should you find your circumstances intolerable?

[rubiks]

I see you're from Western Canada :P

Yep we are in High River. Nothing has sold where we live yet however things are selling around town.

What do you mean by "What discounts are being offered for perception?"?