If you bought a home to live in - Who cares what it's worth as long as you can still afford the payments?

The dumb thing is to hold onto something you don't need in the hopes that the market will come back (it won't in the near-term: 2-5 years, maybe longer) and end up with negative cash-flow, effectively subsidizing someone else's living situation for the duration of the mortgage - and paying interest on it.

Better off to admit your error at buying something that was unaffordable and/or overpriced, do a short sale, write the check for the difference and be done with it.

if the condo was purchased to flip as described in the article above, one of the other benefits of renting out the condo in this situation, is that you now have a business that is losing money and can take many, though not all, of the losses off your income tax. since you can't claim the interest on an investment property, you might as well take what you can.

and when the market recovers will vary wildly depending on location. some are already starting to come back, others might not recover for a decade. so to hold or not surely depends on the location.

When I was a kid in the 1970s, everyone was selling their apartments at fire-sale prices because the city was bankrupt and "no one would ever want to live there in 10 or 20 years." I can't tell you how many of my childhood friends lament how their parents panicked and sold the Central Park West classic six for 50K.

P.S. Sorry -- forgot to mention that the above comment was about New York. I've lived through two periods when New Yorkers sold real estate at a loss because they thought they'd never get their money back, when all they had to do was wait 5 years or so.

There was an article in New York magazine in the early 90s about how "no one" wanted to buy one-bedrooms in New York, at prices in the 75 - 100K range. Ten years later, the apartments were over 200K. Just saying...

@ bepsf:

You missed a key sentence: "but if your condo is uninhabited or you're planning to move and selling isn't possible"

There are a lot of situations when renting makes a great deal more sense than "admitting your error and being done with it." I know several condo owners who are currently in this situation, and while it isn't ideal, it's the best option at the moment.

One friend is indefinitely away on business 5 days a week; she rented her condo out and stays with her parents when she's in town. Her parents love it, she'll have a home again when her business affairs settle down, and since her employer is paying for her lodging, food, and travel five days a week, she's not in bad financial shape.

Another friend recently moved in with his fiance. His condo is a tiny but very cool loft in a lively neighborhood near a college, so he's able to rent it out on a month-to-month basis while looking to sell it.

Renting isnt that easy because Most condos have a limit has to how many renters can occupy the complex.

"... is that you now have a business that is losing money and can take many, though not all, of the losses off your income tax."

I'm not a tax attorney so hopefully someone more knowledgable than I can weigh in here, but I thought you had to show some positive cash flow in a business before you could start taking deductions on business losses - You can't take losses right off the bat...
...and those losses may help offset your total taxable income - but they're not tax credits so you're still going to still be out significant dollars to effectively zero out your tax bill. You also can't take more deductions than your income - Excess deductions roll over to the next tax year for a maximum of 5 years.

Tax rules for amateur real estate investors (as opposed to professional real estate investors who spend at least 50% of their work hours on real estate activities) can get rather complicated, and highly fact-specific (i.e. based on the facts of the taxpayer's specific situation).

Consult a CPA or tax attorney.

Yes, as Joan52 mentioned, in most cases you can only have 20% of the units in a condo building rented out to non-owners. More than that makes it a commercial property and the taxes are different. Most buildings should have this in their rules and regulations. We only have 14 units and 2 are rented out... the rest of us are stuck living here, riding it out or selling at a loss. No fun.

The rental market in Chicago is dead right now, many unethical investors can't cover their expenses. I find the advice, in fact, somewhat unethical (which is too kind a term for apartment services....).

Downside of being a landlord (from personal experience):

1. The jerk who did engine repair on the living room carpet (we had to replace all the carpeting, which wasn't that old, after they left)
2. The nut job whose large snake escaped and died inside a wall - we were so pleased to have to rip out the drywall and repair it after that happened. You don't want to know what dead snake smells like after it's had a chance to ripen.
3. The amateur decorator who wallpapered and stencilled the entire place after signing a lease promising not to paint or wallpaper (one coat of primer doesn't cut it when painting over stencils and I won't even go into how long it took to strip the improperly installed wallpaper).
4. The creepy family who left latches on the children's bedroom doors - on the outside (I don't even want to consider what might have gone on there)

But all those crazy tenants don't come close to the scumbag property management company who raised the rent without telling us, and pocketed the difference for over a year before we discovered it. I'd skip the whole property management route - you still have to deal with the aftermath of crazy tenants, but you'll pay a lot more for the privilege.

Chicago would have fared far better if not for the insane property tax hikes. We could afford our mortgage just fine before they went from $3500 to $5800 to $7800. Thanks Todd Stroger.