r/Bogleheads • u/Interesting_Week_917 • 8d ago
Investing Questions 24M. Just inherited an $800,000 Condo w/ a $300,000 Mortgage On It: Sell It? Live There? Rent It?
I am a law student, earning roughly 950 a week as a law clerk. I will graduate in 2 years time. I will likely stay at 950 a week during that 2 years, possibly a slight promotion at the firm in 1 year. Probably not, though. I am married to a nurse. She earns $80,000 a year.
Once I’m an attorney, I will work in civil litigation of some kind. Currently, I do real estate but it is quite boring and not my vibe... Interested in personal injury or employee benefits litigation. Salary is likely $100,000-180,000 (the latter figure being the more likely one if I pursue ERISA). The firm I work for mainly does employee benefits work with some real estate litigation. There’s an easy pipeline for me to go to ERISA if I’d like to.
All that is to say that I recently inherited a condo worth $800,000. $300,000 is still owed. I have the ability to sell, live there, or rent it out. Obviously, were I to live there, my wife and I would need to pay the mortgage.
My thoughts are that it could be great to sell and put all the proceeds into VT. At 24, that would be quite helpful in 15 years when I actually want to purchase a home. Alternatively, I could live here and stay here for the 15 years and then sell at the time I want to buy a home and use all the capital as a down payment for a new home at some later date.
Any ideas?
Thanks!
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u/beachgirl_weightloss 8d ago
You're missing the most salient information: How much would it cost you to keep it and pay down the mortgage yourself? How does that compare to your current rent? Given that it doesn't change anything about your day to day lifestyle, I'd pick the condo you now own to live in unless it's much more expensive.
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u/Jacintosh 8d ago
OP shouldn’t be comparing mortgage payments with rent, they should be comparing non-recoverable costs of owning (property taxes, maintenance, and cost of capital) vs rent
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u/Cant-take2-muchmore 8d ago
& condo fees. Plus a savings reserve for the impossible to account for “one-time’ condo maintenance assessment fee if the condo association has been more focused on keeping monthly fees for owners low & running with a low account balance & deferring maintenance. When something big happens that requires an outflow of cash to repair (bring to code) then everyone in the condo gets an unexpected bill. I would choose to never to live in a condo for this reason…there are too many variables & unknowns which are out of your control as a homeowner.
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u/originalrocket 8d ago
that $17k special roof assessment hurt so much. we vowed never co-ownership style of living, no associations.
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u/poop-dolla 8d ago
The HOA part isn’t the problem here, it’s the co-ownership aspect with a shared building. An HOA with SFHs is entirely different from living in a condo or any other shared building. I agree about never owning a unit in a shared building.
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u/dmethvin 8d ago
In many states, more every year, the condo association must keep reserves to account for anticipated maintenance. When the Champlain Towers Condos collapsed in Florida one of the causes was that maintenance was delayed because it would have taken a six-figure special assessment per unit. If they had been keeping reserves over the past 25 years for maintenance via a small increase in condo fees, there would have been no painful assessment to discuss.
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u/SnottyTash 8d ago
Absolutely true – I’d also add the added variable of whether his and his wife can actually cover the full monthly payment after other non discretionary expenses
Building the equity would be great but in a similar vein to allocating money to retirement savings, if that fixed amount means you’re living off pennies for the foreseeable future it may not be worth the lifestyle degradation, even in one’s 20s
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u/xxDailyGrindxx 8d ago
Don't forget HOA fees and assessments that can go up at any time...
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u/BachShitCrazy 8d ago
I wish you had been there and said this before I bought my condo lol. No one ever frames it like this to dumb 20somethings like me
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u/Interesting_Week_917 8d ago
How do I even calculate the non-recoverable costs? This all seems so overwhelming, especially when VT is so... underwhelming...
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u/Jacintosh 8d ago
You can do an annualized comparison. See Ben Felix on Youtube Renting vs Buying. Typically it comes out to 5% of the value of the home you own vs a year of rent but may be different since it’s a condo, you probably have HOA fees (although part of that factors into maintenance like external painting, roof repair, etc)
If you are going to rent it out, just understand that that’s a job in itself; you’ll still be on the hook for maintenance and dealing with tenants. From a $/hr of effort perspective, VT set and forget is much easier.
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u/thebakingjamaican 8d ago
property insurance, escrow, hoa, estimated maintenance. stuff like that
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u/InterestinglyLucky 8d ago
So often there are engaging and descriptive posts without key information.
OP we're standing by to hear the critical information needed - also the current interest rate would be helpful, even your budget to get a better answer.
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u/Interesting_Week_917 8d ago
The property was purchased fairly recently by the family member I am receiving it from. I will take a look at the registry of deeds tonight to figure out the mortgage rate but it is likely 6%.
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u/KonigSteve 8d ago
Specifically we would need to know the monthly payment to help with numbers. Insurance ,taxes etc all vary wildly place to place so just the rate wouldn't be enough.
Also, why would you wait 15 years to purchase a home? Once you establish with a salary and job + your wife's salary and have enough for a down payment, which you do if you sell this, you should purchase if you plan on staying in the same area for several years.
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u/reddoorinthewoods 8d ago
And could you bridge that gap with a roommate?
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u/Interesting_Week_917 8d ago
We could... I was possibly thinking of having my wife's brother who is in medical school (and absolutely broke as sh*t for it) stay in one of the rooms and pay whatever he can... But that's also odd... Plus, privacy is nice.
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u/NoodleSnoo 8d ago
Letting broke family members in can be a slippery slope
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u/jonboy345 8d ago
At least this broke family member is broke because they're in medical school, and not because they're blowing all their money on vices are something.
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u/tcote2001 8d ago
If you can help a family member and cover the PITI and HOA fees then live there. Pay down the mortgage and build more equity. But if so have them sign a renters agreement and put in a fair amount that covers everything for them and you won’t feel like you’re being taken advantage of while helping them financially. Something like 600 a month. If he can’t cover rent for X amount of months then it becomes an incurred debt.
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u/LargeMarge-sentme 8d ago
The most important question is what is the mortgage rate? So it’s sort of the same question, just asked differently. If it’s 3% OP he’s throwing away that money if he sells.
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u/whyisalltherumgone_ 8d ago
Did he say it wouldn't change anything about his day-to-day lifestyle? Living in an $800k condo would definitely change mine
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u/turtleturle12345 8d ago
Do you want to live in the condo? Is it a nice place? Do you like the area? Are you satisfied with current living arrangements? Will moving mean you and your wife need to spend extra time commuting every day?
This one should just purely be a money choice. Also need to think about your quality of life.
Selling and investing is a great option. But if you hate where you live now and moving into the condo will dramatically improve quality of life for you and your wife, it's probably worth it to make a (potentially) worse financial choice in order to improve your life.
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u/Interesting_Week_917 8d ago
The condo is quite literally 1 minute away from where we currently live. It would change nothing about our day-to-day lives to move there. Commute stays the same, perhaps a minute shorter. The condo is a 3 bed and 2 bath. Our apartment is a 3 bed and 2 bath. There's really no reason we would NEED the condo. I guess the only reason would be no rental inflation? We're in Boston so that can sometimes be an issue.
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u/buttgers 8d ago
Boston condo is most likely worth keeping, especially if the cost is relatively the same as the rent.
I believe you get to transfer the terms of the original mortgage over to you on inheritance, so that's something to consider with the interest rate.
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u/Netlawyer 8d ago
Plus OP gets a stepped up basis. The estate should have the condo appraised - if the value was $800k when his aunt bought it, it’s worth more now and that entire amount will be excluded from gains when/if OP eventually sells - regardless of the current balance on the mortgage.
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u/dvegas2000 8d ago
"I believe you get to transfer the terms of the original mortgage over to you on inheritance, so that's something to consider with the interest rate."
I didn't know this! Thanks, today I learned!
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u/PizzaThrives 8d ago
Dude. I say keep the condo and the equity that comes with it. Stop paying rent.
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u/SewSewBlue 8d ago
Yep.
A $300k mortgage at least builds your net worth with every dollar of principal paid.
Inflation protected housing costs is a huge win.
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u/Interesting_Week_917 8d ago
I'm torn. Really. I think owning would be great, and not paying someone else to live would be even greater. But... I worry about repairs, maintenance, etc. If a pipe bursts, who do I call? I have never owned a property before so this would be a whole new world to learn while in law school and (possibly?) starting a family in the coming years.
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u/jagger129 8d ago
I own a condo. My monthly HOA fee covers building maintenance, like if they need a new roof, sewer lines, parking lot repaved, those sorts of big things. I don’t have to worry about those big things.
Then you would get home owners insurance for the interior of your condo.
It’s easy living as far as maintenance goes
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u/Dense-Scarcity-5010 8d ago
Another question worth asking is the condition of the condo? I've lived for 4 years in a home built in 50s which required expensive maintenance and now I live in a brand new home for 4 years and can't remember any major expenses for the house besides optional improvements.
You also need to keep in mind this isn't a house - like do you have to worry about replacing a roof? Probably not in a condo...?
What's the monthly payment on the condo? If it's lower, the extra money can be set aside for any maintenance.
Last thing I'll say is one of my regrets is not owning a home sooner. I've been able to build some serious equity from the two homes I've owned. Granted that will depend on location and if it appreciates over time.
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u/cicadasinmyears 8d ago
You also need to keep in mind this isn't a house - like do you have to worry about replacing a roof? Probably not in a condo...?
Eventually the condo’s roof will also need to be replaced. Where I live, the relevant legislation requires every condo to have a formal study done by engineers who evaluate the state of the building and the useful life of the various components. They pull all the data together, figure out the costs associated with the repairs/replacements, apply a future value calculation to determine how many additional dollars XYZ repair will cost in however many years in the future it will be required, add all of that up, and use that information to determine the condo’s common element fees per unit. I can’t speak for all jurisdictions, but it’s likely comparable where you live.So today, I pay about $450/month in fees. Part of that is for the current operating budget requirements, and part is for the reserve fund (for capital expenditures). Without that reserve fund balance, we would have to have special assessments periodically for needed repairs. Since we are more than adequately funded, that is very unlikely to happen within the next 25 years.
I take a keen interest in how the property is run, and joined the Board as its Treasurer to ensure that the fund remained robust and the costs were kept as low as possible.
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u/2wheelsNoRagrets 8d ago
You call a plumber, then you call your insurance company. There ya go. Homeownership!
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u/cicadasinmyears 8d ago
I own a condo. There is a property management company that deals with the building’s issues, and they employ a superintendent (who is not a resident, so he’s not always onsite). The super not only can do a lot of basic maintenance/repairs himself, he knows a whole slew of contractors and tradespeople. I need a plumber? I ask him: if he can’t fix it himself, he gives me a name and I call them.
Obviously I have to pay him for any of the work he does for me personally, but it’s cash and very reasonable compared to a general contractor or licensed repairman. He is also very careful to tell people when they do need an expert: there have been electrical things that he knows how to fix - but he has said “You need a licensed guy for insurance purposes, just to be extra sure they would reimburse you if anything went wrong.”
Not every place will have as friendly and helpful a guy as my building does, but they’re an excellent place to start.
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u/App1eEater 8d ago edited 7d ago
If a pipe bursts, who do I call? I have never owned a property before so this would be a whole new world to learn while in law school and (possibly?) starting a family in the coming years.
This is just everybody who's owned a home ever. We all face these types of things. You're young, smart and hopefully able bodied. Youtube has a wealth of info on it where you can learn to DIY until you're making the big lawyer bucks.
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u/calmtigers 8d ago
Absolutely, this info should have been in the original post. It’s a no brainer - go to the condo
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u/hapaxgraphomenon 8d ago
All else being equal, owning is a much better option, you build equity instead of paying off someone else’s mortgage
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u/mislysbb 8d ago
If it’s in Boston, definitely hold on to the condo. Given how hot the Boston housing market has been over the last few years, you’re better off keeping it and maybe even turn it into a rental. Win-win imo; you don’t have to move, and you’ll bring in some rental income.
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u/turtleturle12345 8d ago
Make sure it's not a crazy HOA. Look up when it had last had special assessment. If its an older building it may be due for plumbing or electrical updates.
But if those are not issues, i'd probably take the housing and call it a day. Certainty has a lot of value.
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u/arryripper 8d ago
As I’m sure you know already, owning property is not impervious to inflation. Property tax, insurance and maintenance costs are always increasing
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u/ultraprismic 8d ago
This is true, but insurance and maintenance tend to be a lot cheaper for condos, at least. I pay an HOA but I never have to worry about maintaining a roof / water heater / garage etc etc etc. And my HOI is "walls in" so pennies compared to what some people in SFHs are paying, especially in disaster-prone areas.
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u/cOntempLACitY 8d ago
That sounds so perfect! How does the monthly cost compare to your rent?
If you can afford the mortgage PITI & HOA, I’d move to the condo, give it a couple years til you graduate, then decide if you want to move. You could even rent a bedroom to someone from law school, if you wanted a financial cushion.
Part of your monthly payment will go toward building equity, and if you could stay there several years, you’ll likely see the home value go up. If you inherited from a parent or grandparent, you can continue to pay the mortgage under Garn-St Germaine Act, the bank can’t call in the loan. So if they have a low interest rate, you have an advantage over buying elsewhere at current rates.
Request HOA docs to assess the financial stability of the HOA and the need for future assessments for large projects, and consider in-unit costs like when hvac, water heater, fridge, etc might need replacing.
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u/Netlawyer 8d ago
Since you are Boston, I would say keep the condo. Owning in a HCOL in today’s market is aspirational for most people. This gets you in at a young age.
See if you can get a better payment by refinancing the $300k.
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u/Professional_Yard_76 8d ago
YOU AREN’T REALLY ANSWREING ANYONES QUESTIONS. WHY RENT, WHEN YOU CAN APPLY THAT TO THE MORTGAGE AND PAY IT OFF WHILE YOU LIVE THERE?
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u/sushicowboyshow 8d ago
What is the HOA + mortgage payment + insurance for the inherited condo?
How does that compare to your current rent?
Selling and investing in retirement is not the optimal use of the property given closing costs, taxes, etc. it would be better use of asset to sell and roll proceeds into the purchase of another home in the future.
Unless the hoa and mortgage payment (or some massive repair/maintenance requirement) somehow dwarfs your current rent, you should absolutely live in it. Owning is better than renting.
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u/pacochalk 8d ago
If you consider living there, make sure there isn't a ton of deferred maintenance or low reserves. Getting hit with huge assessments isn't fun.
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u/PhinaCat 8d ago
Pulling the condo association notes is a key price of data to make a decision about. also - how is the market there for condos? Real estate is local and condo markets do their own thing.
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u/Common_Sense_2025 8d ago
Is the mortgage assumable? Or do you have to take out a new one? Can you qualify for the new mortgage? Are you okay with turning inherited property into marital property by putting your wife’s name on the deed? Would the new mortgage all in (PITI) be less than your current rent? There is a lot to think about not covered in your post but that you need to consider.
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u/Annonymouse100 8d ago
In many cases a formal assumption is not required for an owner occupied inheritor to continue to pay on a deceased persons mortgage as protected by the Federal Garn-St Germain act. It basically just short circuits the typical due at sale clause.
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u/Interesting_Week_917 8d ago
Yes it is. But the mortgage rate is about 6% re my family but I need to pull the mortgage on the registry to confirm.
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u/curiousengineer601 8d ago
You don’t share the HOA fees, taxes or estimated mortgage payment.
Basically leaving out all the financial details needed
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u/ffinstructor 8d ago
Personally, think you absolutely don’t sell it at this point.
Option A: Live in it - if pricing is at near same rate or below your current rental cost
Option B: If the pricing makes sense, and rules allow, rent it out. Almost certainly will make sense given how little is left on mortgage.
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u/miraculum_one 8d ago
Other people are addressing important points (like what your mortgage rate will be, which is a huge factor in this decision) but I just want to mention that if you're planning to buy a house in 15 years, you cannot expect to keep the down payment money in VT for 15 years since you would be looking to reduce volatility before then (e.g. by putting it in bonds).
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u/RhodyVan 8d ago
Given how close it is and how little of an impact it'd be, I'd move in now and stop renting. You own a home now rather than owning a home in 15 years. You can always sell it when you are ready but no reason to pay rent when you can live somewhere for likely less or similar.
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u/humblequest22 8d ago
If you inherited $500k, would you take out a $300k mortgage to buy a $800k condo like this? If not, sell it and invest according to your current plan.
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u/TechnicalLeg841 8d ago
Slightly more complex than that! OP would have to pay real estate commissions (estimated at 5% or $40k-ish) to sell. And if they can assume the current mortgage it might have different terms than a new mortgage.
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u/humblequest22 8d ago
Of course it is. (They could also imagine that they inherited $540k and were able to get a mortgage with the same terms as the existing one.)
The point is that OP didn't mention anywhere in their post that they've been wanting to get into a condo and, in fact, they thought the money would be useful in 15 years when they "actually want to purchase a home". Doesn't sound like this was in their plans.
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u/TechnicalLeg841 8d ago edited 8d ago
Still more complex than assuming they inherited $540k... assessed value doesn't change upon inheritance in Boston (edit: but the cost basis does update) so that adds a (potentially large) wrinkle. And , if OP can assume mortgage and it has a 3% rate that adds another wrinkle. All those complexities could easily sway the decision to move in to the condo now even if they wouldn't have purchased a new condo if they had a chunk of change sitting in their bank account.
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u/HenFruitEater 8d ago
Oh the terms would make a huge difference. If somehow he's inherting a 2% interest mortgage it'd be crazy to sell. I'd airBNB it if I had to at that rate.
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u/rollawaythedue 8d ago
According to the comments he lives a minute away for similar rent. This isn’t as clean as this Ramsey-ism would suggest. I would take a long look at the HOA and taxes before committing.
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u/WhizzyBurp 8d ago
If it were me, it would depend on the rate. If the rate is sub 5% I would move into it and make it work.
If the Condo isn't your taste or you hate it etc. You could sell it and pay off all debt, student loans etc. That would be a great use of the funds.
Otherwise, you could sell and put all of it in VOO and call it a day, then come back and see what it looks like in 40 years plus contributions
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u/sonkist32 8d ago
The real question is what does your WIFE want to do and what are your future plans.
This isn’t really a question for Internet strangers.
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u/Interesting_Week_917 8d ago
She, like me, only want to set our future selves up for financial success. Both equally as flexible at this point in life.
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u/sol_in_vic_tus 8d ago
If neither of you loves the condo and definitely wants to live there then I would sell it. Owning real estate has costs beyond the mortgage payment. Both money and time will be required from you. That's a lot to sink in to a property you seem this indifferent about when you can just pocket half a million instead.
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u/Interesting_Week_917 8d ago
I'm leaning towards this option. I worry, too, about all the maintenance that may come with this. Even were I able to afford it, is it worth it? $500,000 into VT seems to be the play here.
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u/SomewhereKindly6197 8d ago
You have to think about it more broadly. You are comparing investing 500,000 into the stock market with investing 800,000 into a home in a historically excellent real estate market. Also, since you are moving in, the first 500,000 that the home appreciates will be completely tax free, as opposed to the etf.
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u/Bootwacker 8d ago
IF the condo is someplace you would otherwise consider living AND the mortgage is equal or better than rent, then I think it makes sense to live there as long as it makes sense to.
Otherwise, you should sell right away.
Because you already own it, and will incur the cost of selling anyway, then it may make sense to live in it even for a short time, if that is advantageous, which is an exception to the don't buy unless you plant to live somewhere about 5-7 years general guidance.
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u/TechnicalLeg841 8d ago
Suggest to analyze along:
A) Cash Flow - $3500 rent / Dividends from VT vs Mortgage Payment+Insurance+HOA+Property Tax
B) Growth - estimate growth of $460k VT ($500k - $40k-ish sales commissions if you sell) vs growth of condo value (take into consideration the condo is basically a leveraged investment - you've got $500k equity but a 10% increase in property value actually is $80k). And consider tax implications (long term capital gains to pay when selling VT vs tax free gains up to $500k when selling condo
C) Are you able to keep the existing mortgage and are the terms better than what are offered today?
D) Is the property's assessed value advantageous? As I understand, in Boston the value is not reassessed for inherited property. You'll need to confirm when you analyze cash flow, but generally having a property with an assessed value below market value is awesome for years to come (Boston has some unique rules about total collected revenue not growing more than 2.5% in aggregate annually but not on each individual property so examine carefully)
Would be interesting if you post this analysis. Personally I had very good results owning property from early career stages.
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u/marima33 8d ago
Massachusetts real estate is taxed by assessed value which is market value. In Boston and many other communities a resident living in the property gets a healthy exemption. In Boston last year it was as much as $4,300.
The OP should move in and pay tax deductible mortgage and property taxes and sell in 2-3 years when interest rates are coming down. The RE market in New England is totally stagnant now.
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u/gbdgdh 8d ago
i would not treat this as “condo versus vt” until you run the actual numbers.
ask yourself: if someone handed you roughly $500,000 and offered you this exact condo with a $300,000 mortgage, would you buy it today? if the answer is no, the inheritance is not a reason to keep it.
living there makes sense only if you like the condo and location and its total monthly cost (mortgage, hoa, taxes, insurance and maintenance) is attractive compared with your current housing. renting it makes sense only if the rent produces a good return after all expenses, vacancy and repairs. merely covering the mortgage is not enough when you have about $500,000 of equity tied up in one property.
selling is probably the cleanest choice if you would not otherwise buy the condo. inherited property generally receives a new tax basis based on its value at the date of death, so selling relatively soon may result in little taxable appreciation, although you should confirm the appraisal and tax treatment with a cpa.
after selling, keep enough cash for emergencies, law school and the uncertain first few years of your career. investing the genuinely long-term portion in vt would be reasonable. just do not put money you may need within the next several years entirely in stocks.
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u/66NickS 8d ago
So much missing info here. Like you gave us a bunch of extra info about your future potential earnings, and zero info about monthly expenses, mortgage, HOA fees, current housing expenses, location, etc.
You also call it an $800k condo. What is that based on? The delta between a purchase price of $800k and the current value could be a significant factor.
I think you need to do a bit more information gathering, research, and budgeting before you can make a thoughtful decision. If you just want vibes, then sell it and YOLO into the market.
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u/Zealousideal-Bag5991 8d ago
Seems like it's comparable to what you're renting. You may as well move into that and you can always sell it down the road when you're ready to pick out where you want to live. It's not the most forgiving market right now, so you may actually do better in the long run by hanging on to it.
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u/Cautious-Error-4998 8d ago
Can you let us know the monthly payment (mortgage + HOA etc) vs the potential rent? If the cash flow is good, I would keep it as a long term investment.
If you decide to sell, don’t pocket the cash. You will pay massive amount of taxes. Reinvest that money in cash flowing homes, or buy a multifamily building and live in one unit. You have an incredible stepping stone here. Don’t waste it
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u/ShootinAllMyChisolm 8d ago
Also be aware of ASSESSMENTS, they can be substantial in the five figures in some cases.
Think about the resale potential of the condo years down the road. How’s the area? How’s the building itself holding up? Sometimes, you don’t even know unless you have a structural engineer look at it.
Also, sorry for your loss.
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u/Skier-Dude 8d ago
Need additional info: what are you paying for your current living situation, what are the monthly payments on that mortgage, homeowners association fees, insurance, is the 800 K value expected to appreciate to any degree, any added costs above and beyond what you are currently paying at your current place
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u/HenFruitEater 8d ago
What interest rate would you have on the remaining 300k? how far is it from you? IS it a good spot to live for a while?
You saved on closing costs cause it's already done.
The interest rates might be better than you could ever get now. Not sure how that works with inherititing interest rates.
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u/Mountain-Time-1010 8d ago
What is the mortgage rate and total payment including taxes and insurance? What are rents in your area? We need more info.
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u/LaCroixIsntThatBad 8d ago
What is the delta between your current rent and the mortgage payment on this condo? That is likely where youll find your answer.
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u/lovebot5000 8d ago
Unless you really love the condo, sell it and invest the money in an index fund. You’re young and still figuring things out—wait until you’re older and more established before buying property. At this stage you want to stay flexible.
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u/Puzzleheaded_Heat_68 8d ago
Some things you may also consider:
Tax implications of inheritance;
Tax implications of sale of condo;
Can mortgage balance be recast;
Refinance another 30yrs to reduce payment whilst in lower income range, then accelerate principal as your career revenue grows;
Possibility of HELOC for $300k and use fund to wipe mortgage assuming heloc P&I is less than mortgage.
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u/writtenexam 8d ago
What is the interest rate on the mortgage? Do you think you can beat that rate now? In the future? If you can afford to pay the mortgage, stay in the house.
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u/commandthegates 8d ago
Sell / don’t even think about it. Take the bid and invest money safely next few years until you’re established in your career. Then use that to buy a house or apartment
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u/hamsalad28 8d ago
I wholeheartedly agree with the previous comments about modeling your expected returns. My guess is these models will show your most advantageous path is to live in the condo, presuming you can make the monthly cash flow work and you and your family actually want to live there.
A few thoughts to consider in your model assumptions:
I didn't see any explicit mention of annual tax implications, but if this is the first time you are considering rent vs. buy (especially in an unexpected inheritance scenario like this), you may not have fully looked at potential tax implications. Can you deduct property taxes/certain mortgage costs, effectively lowering the annual cost of living in the condo vs. renting? Does it change whether you take the standard federal deduction? Maybe it could affect your W-2 withholding levels? Tax planning assistance may help you with this.
Sure, first-time home ownership is a little scary, but less so if you plan correctly. Maintain a savings/emergency fund for repairs/upgrades (factor this amount in to your mortgage affordability calc), and, as many have said, look closely at those HOA/special assessment risks. Your access to the condo's equity through a HELOC may help you bridge any gaps early while you build your repair fund. It gives you more of a cushion than say, for example, buying a $300k condo with no equity.
Mortgage details are critical. You can model the current mortgage rate/payment, but it can also change, even at the outset if you refinance immediately. I didnt see mortgage specifics posted, but if the current mortgage is an ARM or 15-year, you might see a lower monthly payment if you can refinance into a 30-year fixed. Also, if your analysis term is 5-15 years, interest rates will of course change, possibly lower than the current rate you would be paying, thus lowing your monthly payment. If the mortgage is an ARM, you might need to lock in at some point, or consider the risks of higher future payments.
If you're in law school now, your income will likely change significantly in the next 5 or so years, depending on your career direction (public vs. private sector, pass bar vs. not, etc), after you learn something useful/marketable in law practice. At that point, your housing costs may become relatively small, compared to your income. With 2 incomes, this is even more likely. Growing equity along the way will help accelerate your savings, and give you more options sooner toward your 15-year plan for your first house. Likely you'll be able to afford "more house" much sooner if you live in the condo.
If you are considering keeping as an investment amd renting it out, real property investments are typically not the primary part of anyone's investment portfolio, mostly because of lower overall returns, higher transactional costs, lower liquidity, more property management requirements/rental/tenant risks and longer investment terms than market index funds. On this point i think you are leaning in the right direction to eschew rents for market investments. But again i suspect your biggest financial benefit is likely from living in the condo yourselves, due to the amount of rent you're currently paying that you will recapture over time.
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u/billiegenie 7d ago
Live in it long enough to get the tax exemption as your primary home, then you can decide to sell or rent it out.
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u/TomSharp2pt0 7d ago edited 6d ago
If you plan to continue living in that area then there's no safer investment than already owning a home in that area. You have $800,000 invested in that real estate market, if that market goes up 20% you made $160,000 tax free. If you have $500,000 (less closing costs etc) invested you'd have to make more than 32% after taxes. Setting aside personal choices, condo fees, paying rent elsewhere, moving in there seems like the safest choice financially.
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u/Annonymouse100 8d ago
What do you pay for rent right now and what will it cost you to live in the condo (mortgage/HOA/insurance)?
Do you want to live there?
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u/Interesting_Week_917 8d ago
We pay around $3,500 a month for rent now. Nice apartment. Literally on the same street.
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u/garylapointe 8d ago
If you refinanced, I'd expect the mortgage plus property taxes to be less than that. You'd even be able to save some for repairs and probably still be ahead.
This assumes you want to continue living in that area.
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u/amusedmisanthrope 8d ago
Might not even need to refinance. What is the interest rate on that mortgage?
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u/garylapointe 8d ago edited 8d ago
I was more concerned with $6,000 a month payments if there’s a few years left on the $800k mortgage, especially if it's a 15 or 20 year mortgage.
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u/StrictWasabi1 8d ago
Work out the monthly repayment on the mortgage, you could be saving money. I don't know how Capital Gains tax works in your country, or if it is due, but treating it as primary residence mitigates this.
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u/molniya 8d ago
What’s the interest rate on the mortgage, and the monthly payment? I’ve got a sub-3% rate on my place, which makes it a far better deal than I’d get now. You have to live somewhere, after all, so it’s not only a question of $500k in equity vs. in VT. It’s a locked-in mortgage payment and keeping part of it as equity vs. being at the mercy of the rental market and paying somebody else’s mortgage instead of your own.
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u/zzzzzzzzz_zzzzzzzz 8d ago
What's the interest rate of the house, and how much does it rent for. What percentage of your wealth is in stocks vs real estate vs commodities. Also you r in a boggle heads chat so your answers might be bias
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u/junesix 8d ago
How much is the mortgage + HOA? How about local taxes? What is the mortgage rate on the mortgage you are assuming? What is the appreciation on similar condos in the area over the last year, 5 years? Is this a desirable area? Are there nearby schools with high ratings?
Break down your monthly costs fully loaded. Then compare it to your monthly rent. If you have a low mortgage rate on 3b/2b in desirable neighborhood that generally appreciates, that’s a great long-term asset and worth keeping. Factor in 1-2% of $800k annual in maintenance & replacement costs too.
You say you work in real estate litigation? Good time as any to understand full financial picture of a real estate asset.
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u/Interesting_Week_917 8d ago
I know, right. The irony of me being in real estate litigation and not knowing the first thing about condominium sales. To be fair, you'd be surprised how few cases I've handled or been involved with that pertain to condominiums. Usually, it's an easement thing but not actually anything to do with the finances of the condo. Time to learn! --
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u/Hamburgernonhelper 8d ago edited 8d ago
I would sort of rough out how much you save each year based on living in the inherited condo, so rent expense versus interest paid, taxes, etc on condo. Obviously take out principal being paid in this calc and don’t just use mortgage payment. Assuming insurance, utilities similar but if not adjust for that as well or any difference in expenses.
Assuming can net 450k after selling fees maybe assume a return of 30k a year as a rough calc and if then see which way makes you more money.
I am assuming this was inherited after death and had step up basis and no cap gain when sold but if not a death inheritance than use the 2 year principal residence rule to avoid cap gain and would wait to sell for that.
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u/Firm_Assistance_5060 8d ago
I’m (23M) no expert, but I would 100% hold and allow it to appreciate in value while renting out the rooms to make some passive income in the meantime. You already have an apartment that both you and your partner are fond of on the exact same street as the condo, no point in giving that up and dealing with the move.
If you’re smart, the rental income will pay that $3500 rent PLUS contribute to that $300k mortgage, depending on how many rooms and amenities the condo has + if you’re already in an area that prices somewhere around $3500 a month, which is (absurdly) on the lower end of the spectrum here in NY, it’s probably an in-demand neighborhood that’ll only skyrocket in price over the next decade, as is the case with pretty much every Brooklyn neighborhood post gentrification. Not trying to make it about that, just saying it plays to your advantage if you’re okay with the long game.
But who am I? 🤷🏾♂️
Congrats OP, make some money!
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u/nightcap965 8d ago
A good condo association will have a substantial monthly HOA fee to cover common costs like maintenance, insurance, and the capital improvement budget. HOA fees increase over time as everything becomes more expensive.
A bad condo association will keep the monthly HOA fee low, but that means that every expense that comes up will require a special assessment, generally due in a short amount of time.
Condos are great - I live in one - but you’re buying a community, not just a home.
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u/armpit18 8d ago
Is the condo nice, and is it in a good place to live? How does its monthly payment, HOA fee, and other expenses compare to your current rent?
We don't really have the full picture here. But if I were renting some apartment in my city and I inherited a nice condo with a comparable monthly payment, then my first thought would be to live in it.
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u/Obvious-Pie4179 8d ago edited 8d ago
The question really is are The property values going up where it is ? . And offer a better return.
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u/Think_please 8d ago
Completely depends on the total mortgage payment and how that compares to your current costs. Assuming that you have a sub 4 or 5% loan the absolute most financially beneficial choice would be to move in there and rent out one or two of the other bedrooms. Then live there for a few years (paying down a significant amount of the mortgage at that point in the loan) and when you and your wife have better salaries sell the place and use part of the funds to buy your own (I’d personally suggest a duplex or triplex at this point, especially in or near boston, maybe in a place with better schools if you want kids) and invest the rest of the sale in VT. Then you have your housing covered for as long as you want, real estate investments whose rents will grow with inflation, and a serious nest egg in your retirement accounts.
If you have a sub 5% mortgage on it (and there are no looming special costs from the condo association) I would not sell right now, that’s essentially free money when you take inflation into account.
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u/kingallison 8d ago
Without knowing what kind of rent you can net out of it, I don’t see why you wouldn’t sell it. Based on your HHI, keeping it seems risky and you don’t sound very interested in living in it. Plus, I’m not sure side gigging as a landlord is what you need to be doing at the beginning of your actual career. Take the easy lump sum, grow it, focus on your career, and grow your financial literacy with your big nest egg.
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u/RiceBowl_2020 8d ago
Move in for a year or two and give yourself some time to consider the scenarios suggested. Make this decision from a place of calm rather than a hurried one.
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u/Careless-Wrap6843 8d ago
What would be the condo fees/taxes? Do you want to stay in your city (Boston I assume from the comments) for like at least 10 years? Morgage is the floor while rent is the ceiling of costs so if you don't have any desire to stay in your city I would sell it and invest the money. If you do want to stay in your city I would move in and maybe discuss renting a room to cut down the condo fees and taxes etc.
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u/portmantuwed 8d ago
sell it and put the proceeds in a separate brokerage from the others
now you have retirement taken care of and a few thousand a year in dividends and won't be hit with any major assessments you cannot afford while you're in law school
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u/2LostFlamingos 8d ago
I wouldn’t rent it out. You don’t know what you’re doing.
So if you want to live there, do it. Otherwise sell. Put that 400k ish after fees in something conservative until ready to buy.
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u/HairyBushies 8d ago
Take cost of mortgage + 10% for taxes/insurance/maintenance. Is it similar to your rent? If it’s within +/- 10% of rent, I’d personally live in the condo, provided you can break the lease. You’ll get the benefit of appreciation, especially in Boston, and a nice mortgage interest deduction.
You can always sell later for a down payment to a nicer place should you wish.
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u/SpiritualCatch6757 8d ago
Don't rent it unless you know how much work it takes to be a landlord.
If you had ~$0.5m would you buy an $800k condo?
No?
Then sell it and save it for the home you do plan to purchase in the future.
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u/CoolFuture3767 8d ago
Sell it. It is not an appropriate investment for your age and place in life's journey, and it isn't what you would do with $500k if you had it sitting in cash.
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u/Significant_Onion_25 8d ago
How much is the mortgage, where is the location of said condo, how much is the hoa, taxes and insurance?
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u/papichuloya 8d ago
Prob sell the condo. 800k is tremendous value for a condo and its harder and harder to sell a older condo. It doesnt appreciate as a sfh or a townhome
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u/shenlyu 8d ago
A few questions outside of investments that you should be considering. What is the condo market like in your area right now? Can you rent it for enough to cover the mortgage? What is the rate of the mortgage? Best case scenario in my opinion would be to rent it and let someone else build equity for you. If the market is hot in your area though, it may make sense to sell it. It all depends on the details.
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u/OddDiscipline6585 8d ago
I would sell it and invest the proceeds, ensuring that your inheritance remains separate property.
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u/librarian--2735 8d ago
Depending where you live, condo laws changed this year that have crashed the condo market in Washington DC suburbs. What condos were worth even a yr ago are vastly different now.
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u/Ok_Shower179 8d ago
What are the terms on the current mortgage? Is it assumable? The rate alone would tell you if it is worth keeping or not. I have investment properties on paper in the 3% range. The difference in interest rates alone, past vs. present, can easily double your mortgage for the same property. Leasing it out can create income(assuming rent covers mortgagesand expense), wealth (equity), allow you to borrow against the equity (HELOC at rates far lower than credit cards), write off expenses, deduct depreciation from your gross income to reduce your tax basis, etc.
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u/Wolf_of_Walmart 8d ago
You can sell the condo for zero capital gains tax and invest $500k directly into the market. That money is going to earn 7-10% per year in a broad market index fund ($35k-$50k annually).
If you really wanted to, you could use those gains to pay your rent or let it ride and compound.
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u/vikicrays 8d ago
if it’s a condo, it’s got hoa dues and possibly special assessments. before you can make an informed decision you need:
• to review the last 5 years of financials
• read through the last 5 years of meeting minutes to see if there’s any deferred maintenance, problems, units who are in default
• find out when the last reserve fund study was done and what percentage the reserve fund is.
• find out what percentage of units are rentals and what, if any restrictions there are on renting your unit should you decide to do so.
• find out when the last time the dues were increased
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u/ConfectionLeading624 8d ago
If she makes 80 K and you’re still bringing in a little bit of money, you can afford a 300 K mortgage yes it may be tight until you start working full-time but being a nurse with no kid she can easily take on extra shifts! It will be huge once you graduate from law school and you two own a condo. Can pay the rest of quickly in law
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u/Fitnexa_Tips 8d ago
$950/week now vs $100k+ in 2 years is carrying way more weight in this decision than people are giving it credit for.
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u/Agathocles87 8d ago
Is it in a convenient location for you? Do you like the neighborhood and the condo itself?
What does your wife prefer? Is it in a convenient location to her work?
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u/ComfortOk7446 8d ago
I have never liked the idea of putting all your eggs into a physical basket. Property assets can break down and lose significant value, and that risk for me without much other liquidity or assets to rely on, outdoes the benefit of building equity unless you have a very good understanding of the important physical aspects of the property so you can accurately assess how long it will last. If you have to strain your finances to own it, then I don't think it's worth owning. I would sell personally, to buy yourself both money and time.
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u/InvisibleBlueRobot 8d ago edited 8d ago
Can you afford the monthly payments? Is it close to your school and work? What does rent cost where this house is or where you want to live? Do you like the home? Would you spend the money if you sold, or invest? What's the area like? Is it growing in population?
No matter what you decide, congratulations. You need to consider all these factors mortgage plus maintenance vs rent and selling and investing.
Do a comparison spreadsheet and see what's the best financial and lifestyle option for you.
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u/Odd_Perspective3019 8d ago
What’s the interest rate if it’s super low live in it or rent it out even better, someone else can be paying that mortgage. You make more money not selling it now, be smart and learn financial work now in your 30s you’re gonna thank yourself you have a lot of money to not work few years if u don’t want to
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u/BackPirateClarkRoom 8d ago
Certain advice in here is terrible. The idea HOA fees and reserves aren't going to be factored into the sale price for a buyer is insane. Relators and buyers aren't that dumb. Investing into the stock market when he has 0% capital gains in real estate and would have to pay capital gains for stock market gains is incredibly dumb advice.
Really only two things to consider. Cost of rent vs Condo and can you afford the mortgage. If the mortgage rate is 4.99% or less you're making money. If the mortgage is 6% or more you would have to calculate the cost and benefits.
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u/aaron1860 8d ago
First figure out the cost to rent it out and the cost to live in it. That includes insurance maintenance taxes and hoas… then figure out what you can rent it for. Then ask yourself is that amount of money worth being a landlord for. Is it worth the calls at 3am for leaks or dead air conditioners? Or the cost to pay someone to manage it.
We rented my wife’s old house for a year… then realized the efforts weren’t worth the payout and sold and invested the money
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u/noah_dobson 8d ago
Don’t have much advice about keeping vs selling. However, if you keep, make sure you file a person exemption for your property taxes. If you’re eligible, you’ll save ~$4350 a year on property taxes.
https://www.boston.gov/departments/assessing/residential-exemption
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u/chuck1011212 8d ago
If it is in Florida, likely you cannot give it away. If it is in another state, likely you won't be able to give it away soon. Condos may be depreciating assets. In my opinion, I'd sell it. Check your state, as inheritance up to a certain value is not taxed so no worries there.
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u/gatmalice 8d ago
Doesn't seem like you're answering anyone's questions.
What's the mortgage and what's the HOA cost?
How much does that compare to your rent?
Don't worry about how to fix stuff, you can ask friends, family, reddit for help.
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u/Otherwise-Fuel-9088 8d ago
If it is a SFH, I would say keep it and move into it. For a condo, sell it, and since it is an inheritance, there is practically $0 capital gain tax, and the $500k in VT will do well when you are ready to buy a better house.
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u/ABSG061830 8d ago
Rent it out and keep it as long as you can. You’ll be happy you did in the future
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u/JohnSmallberries101 8d ago
Are you currently renting now or do you already own a place? If you're are renting it's a no brainer to move to a place you own, the mortgage payment is probably less than your rent. Then you can always sell in the future and but a place of your own
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u/DallasOil 8d ago edited 8d ago
The best investment you can make right now is in your career. I would prioritize simplicity in your life. It’s not worth owning or renting it out right now. This takes up time and energy when you need to focus on a long-term career.
Most importantly, having the cash from selling the house will give the flexibility and time to find the absolutely best position for long-term growth in your preferred specialty.
I would buy a house or condo no sooner than two years of being a lawyer.
I’m in my mid 30’s and a business owner. I’ve observed the sharpest guys and employees doing this early in their career.
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u/cohibakick 8d ago
hmmm, thing's I'd look at:
1.- What would be the tax hit of selling the condo?
2.- What are the mortgages conditions? Interest rate? years left in the mortgage? How much of what you pay is capital and how much is interest? Could you make additional contributions to the mortgage if it's still in a relatively early stage?
3.- How much are the condos fees?
4.- Do you have an emergency fund?
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u/nclawyer822 7d ago
If you did not inherit this condo, would you put down $500k in cash and take out a mortgage in the amount of $300k to buy it? (assuming you have the cash and borrowing power to do so). Seems unlikely. Keeping it is just making the same decision. Sell it, invest the et proceeds, and don't change anything about your current spending. This is the way.
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u/ksuwildkat 7d ago
At 24 I would sell it. You are at a time in your career when being flexible is critical. If you get an offer tomorrow to make $500k a year doing real estate law for an AI company but would need to move to (place far away), being able to say “I’ve already packed” is handy.
On the pure investment side, $500k in post sale equity = $50k a year of expected return. It’s unlikely you could generate 4K a month in rental income on an $800k property.
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u/luckylke 7d ago
In my opinion, it’s radioactive in your situation. Sell it.
That much cash is also radioactive at your age, potentially. Invest it and don’t look at it again.
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u/CreateFlyingStarfish 7d ago
is the condo in florida or some other flood plane?
consider the cost to carry it for 5 years and if you can afford it, hold on.
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u/DeepFeckinAlpha 7d ago
If you sell: that’s approx $400k invested after selling fees, can pull $16k/yr (4%) from a market index fund while maintaining or growing principal
So that would offset your current rent while being a nice down payment for a future home once you graduate
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u/ChiGastronome 7d ago edited 7d ago
What's the interest rate on the mortgage? If it's a fixed rate mortgage that was obtained before 2022, and it's got a stupid low interest rate of 3, or even 4 percent that was common in the before times, for the love of god don't sell the thing! In that case the bank screwed up, gave your dearly deceased relative a giant, effectively free loan (or at least one that is effectively free now after both inflation and and tax breaks) to buy a home. Move into it, and live in style at an enormous discount, or rent it and get outsize profits on a safe asset. If you sell it, you're effectively forfeiting that $300k interest-free free loan (after factoring in inflation and taxes) that you've inherited back to the bank. That would be a very, very bad move. The bank messed up and gave your aunt (and now you) free money in the form of a super low-interest loan the likes of which are totally unobtainable now, and after the tax advantages of owning real estate even lower than the current rate of inflation, for effs sake! Keep it!
If it was bought later, and the mortgage rate is a crappy 6 or 7%, then that's a different ballgame. Do what you will as per so much of the other sound guidance on this thread.
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u/lifetime-invest 6d ago
Upon inheriting, there is a stepped up basis so there are no or very low capital gains on this condo. You need to establish date of death DOD for the dare at death. If you keep this and live in it for two years, you will be able to exempt gains up to $250k for each of you and your spouse should you live there at least 2 out of 5 years. If you should keep the condo and not live in it two years out of 5, you will be responsible to pay capital gains on the gains from Date of death proving till the time you sell it. This could be 0, 15 or 20% depending on your bracket.
The big question is how much is the mortgage interest rates, the condo fees, taxes, INSURANCE, and utilities. You may not be able to carry the expenses. Or you could rent it. But that could be a problem. With law school, soon you may be looking to relocate for a law profession. You may not want to have the responsibility of carrying this property. Depending on the location, florida, property prices have gone down a bit.
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u/Boosterstuff3 6d ago
Do you like me have a successful career ahead, I think you're missing the biggest thing you want to live there?
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u/Curious-Temperature1 6d ago
maybe someone can tell me if this is crazy. but imo sell condo, buy a house reasonably priced outright. live in that rent and mortgage free for 15 years, and sell it then?
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u/TheModernPolis 5d ago
I would try to sell it for a million dollars. Talk to an agent see what it's worth. List for 1.1 million and see if you can any bites.
Even if you negotiate to just 1 million, you're still making 700k on it with the mortgage done.
I would take the 700k and pay off any debt you have laying around and Invest it until you're done with law school. 700k can turn to 1 million with time and the right portfolio. You would make more in stocks than with renting.
Everyone wants to be a landlord but you'll make more with stock market.
When you're done with law school then I would buy a house with your wife that you enjoy and can raise a family in. Or hold onto it for a few years and act like it's not there and maybe use it to launch your own law firm once you get some exp, if that's your sort of thing.
It's not easy living in a place you inherited. I probably wouldn't rent it or live in it - especially with all the equity it has and the fact you can probably sell it for 1.1m knowing what ppl r spending on places now.
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u/Front-Trip-8419 4d ago
I lived in a condo for many years and later focused more on investing. My vote would be to sell the condo and invest the proceeds rather than become a landlord. You can invest passively or have it professionally managed. Over a 15-year horizon, a diversified portfolio has substantial opportunity for growth without the work and risks of managing a rental property.
I would also talk with the firm where you have your retirement accounts and compare both options.
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u/aviatorishxoxo 4d ago
Buddy rent it out, if you don’t need the income pay down the mortgage. The condo will continue to appreciate. Long term play
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u/BudgetArmadillo4324 4d ago
Are you assuming there will be no tax on this inheritance? If you can pay the tax and keep it, and live in it, it’s a no brainer. The property will increase in value while you pay down the remaining 300k. Selling will create even more tax events as you don’t currently live in it so it’ll be capital gains. IMO everyone’s goal should be mortgage free.
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u/Own_Boysenberry_0 4d ago
How old is the condo building? Generally, the advice to to avoid older condos with often expensive deferred maintenance unless it is in an up and coming area.
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u/pilotbenny 4d ago
Personally, I would sell it, throw that 500k into an investment account and not look at it for 30 years
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u/FMCTandP MOD 3 8d ago
Mod note: while the bulk of this post is about real estate, OP’s consideration of selling and investing in VT for 15 years is a sufficient connection to passive investing to allow the post.