Thinking about renting out my condo - need a plan of action

[Taylor Caby]

Hey guys,
I'm in the most preliminary stages of considering renting out my condo. I'm in a unique situation so I'll just start explaining it. My real estate knowledge is basically what I learned in two real estate classes in college and from buying this house a year ago (not a whole lot, not clueless).

Here goes:

I bought a condo in jul '06 in Chicago. For those that know the area, it is in Wicker Park (formerly bad 5+ years ago, then artsy over the last few, now just starting to become "nice" - lots of rehabs, nice condos, tons of new restaurants/boutiques - very desireable place to live).

I split the condo with a friend. It is a 3BR, 2200ish sq ft duplex, built about 4 years ago. We paid 548k - he paid cash (family money), i paid 100k up front and took out a mortgage for the other 174k. We have been renting the 3rd bedroom out for 800/mo to a friend (we could/should be renting it for a lot more -- we furnished it and the place is very nice).

I have a 30 year, ARM that started at 7.99%. The rate changes in 2 years and I had a 1 year timeframe where I couldn't find a new loan or pay it off. I was planning on just paying off the loan in a year but some people have told me I should just refinance because now I am a very low risk candidate with my business income (high 6 figures not including poker money) and should be able to get a good rate (has this changed in the last month?).

My roommate who I own the place with just accepted a new job in LA. He is moving next summer and we are trying to figure out what we should do.

My renting roommate is likely to move out in a year. It's possible he will stick around but he is looking at some new jobs and might be buying a place himself.

This is VERY early in the process but I have a lot of time to plan this out. Here are my questions:

1. Should I try to get a new mortgage or just pay this off? What type of rate should I expect to be able to get?

2. My options in a year: A) buyout my roommate, B) sell the place or C) I move out and we try to rent the place to a family or 3 people looking to rent.

If I choose A), i'd rather move out and find people to rent (if the numbers work) because i don't think i'll be able to find 2 roommate friends that can afford to rent here that i'd want to live with.

I'm worried that selling at this time/in this market is a bad idea - so that's why I'm hesitant about B.

C) seems like it would be ideal as my roommate is going to be renting in LA no matter what and his share of the condo is completely paid off. the money was gifted to him and i'm not sure if we sold what exactly he could/would do with the money.

I'd just like to develop a thought process to get started in here so I can spend the next 4-6 months doing some research before I make a move. FWIW, I think I could EASILY get 2500/mo and probably closer to 3000 or 3500 for this place, but i just don't know (does anyone know how I can figure out what I could get)?

If someone could just help me get started with what I should be doing to explore my options, plus any experiences with doing something like this. I figure there should be some sort of analysis I should run on the situation as well -- if i rent this place out obviously i'm going to ahve to live somewhere else. I could buy another place but would honestly rather rent for now because owning this place turned out to be a lot more work than I thought and i have no idea where i will be living in 2-3 years. My rent would probably run between 1000-2000/mo, depending on how nice i wanted to go.

Any sort of help would be appreciated. If someone does a bang up job helping me out i'd be glad to talk poker for a little while or help out in any way i can (not sure if i can but i'd try!).

Thanks,
tc