Categories: Hoboken Condos
There is no lack of uncertainty in our immediate futures. How the real estate market will react to a new administration is anyone’s guess. Interest rates are already rising. Under the Republican’s “Better Way” agenda, the tax code will certainly change, with possible elimination of some or all of the mortgage interest deduction, elimination of 1031 exchanges, and more. Many Hoboken condo owners have substantial gains in the value of their Hoboken condos. They may be tempted to get out while the getting is good. Or they may simply have outgrown the oh-so-common, 1000 square foot two bedroom and figure this is a good time to find a larger home elsewhere. Might it be time to sell that Hoboken condo?
Or should you just rent it out as an investment while you move elsewhere? Here is something to consider with that strategy. First, at least while it lasts, you may lose that huge, $500,000 capital gains exclusion on the sale of your primary residence. Then there is what I call the uncooperative tenant problem. I just experienced exactly this with a recent Hoboken condo sale. The owner came to me to list a 2BR condo he used to call home. For the past few years, it’s been a rental property occupied by two roommates. When the owner informed the tenants he was planning to sell when their lease was up. He was going to list the condo for sale while they were still living there so there wouldn’t be a vacancy. The tenants said they were happy to move and would cooperate with the sale in every possible way.
When I went to the property with my photographer, after coordinating the photo shoot in advance with the tenants, the place was a huge mess. Dishes in the sink, shoes on the floor, papers everywhere. To put it mildly, it did not show well. Even so, against my better advice, the owner said “sell now” rather than wait for them to move out. As appointments were requested, the tenants declined every showing. They agreed to allow us to hold an open house. There was a stench in the apartment similar to a locker room. Dirty laundry piled in a closet was the culprit. We are not at liberty to mess with a tenant’s possessions so there was little we could do besides light a scented candle. Feedback was terrible.
The seller was so afraid of having a vacant property for a month or two, and carrying the mortgage, maintenance and taxes with no rental income, he would not hear of pulling the listing and waiting for the tenants to vacate. Of course, the property did not sell. The tenants left and the seller had the property painted, repaired and cleaned. We were now stuck with a clean but stale listing at a price that was attracting no attention. It wasn’t until the seller finally agreed to lower the asking price by about $25,000 that things picked up. We received multiple offers and the seller accepted one over the lowered asking price but still less than the original list price.
Had the property been put on the market in pristine condition at the beginning, the seller would likely have had multiple offers and possibly received more than the original asking price. Rather than risk losing a few thousand dollars on a possible vacancy for a month or two, this seller lost tens of thousands in potential sale price by squandering an opportunity to make a good impression when first hitting the market. Moral of the story – renting your condo out has risks. Don’t overlook them because they are real and will hit you in the wallet.
For more insight and advice on how to best benefit from today’s real estate market, feel free to contact me any time. I’m always up for a good cup of coffee and conversation about the Hoboken market. You can reach me at lorituroff at gmail.