Re-rent out or sell?

[PocoGirl]

I have a 1570 sq foot, 3 bedroom, 2 1/2 bath townhouse (2008) that I own with the bank and rent it out to a great family who will probably be moving in 2019 with notice. It’s a unit in a good complex only a 12 minute walk to Kin Beach. I bought in Feb 2016 for the going rate of $320,000 and downpayment of $70,000. The last unit that sold in September of 2017, sold for $385,000 at asking price in two weeks. It was an exact same unit that I am renting out except I also have put in a fence at minimal cost. I can write it off and is a good resale value. The rent has been $1,450 going up to $1,475 in March due to strata, property taxes and fence installation to cover cost increases without gouging. I knew going in when buying that I’d have to repaint, put in better carpet and underpad and eventually replace the appliances if I was going to sell or rent out again. The one and only renter I have is awesome! Large family and only living wear and tear which I expected. I’ve only had to have the furnace fixed and minor plumbing to address ie $800 in two years. My dilemma is when the current tenants move out, do I
A) Sell with doing upgrades in paint, somewhat decent appliances (working but not in good condition... previous owners did the damage, and contracor grade to begin with) and put in a half decent carpet and underpad
B) Sell as is when tenants leave taking a bit of a hit because it won’t ‘show’ well and leave it to buyers ‘vision’
C) Rent, with a repaint, carpet replacement and replace the appliances. The current ones are original low grade Frigidaire and not in good condition when I bought

Interested in hearing opinions...

[Jflem1983]

If i were u id gamble a bit and hang onto it. I suspect it may drop a little short term but in a few years u will have it nearly free and clear. Id hold out if i were u. Sounds like a nice place i might add.

Dollar a foot seems reasonable rite now. I hope u continue to find good tenants

[PocoGirl]

If i were u id gamble a bit and hang onto it. I suspect it may drop a little short term but in a few years u will have it nearly free and clear. Id hold out if i were u. Sounds like a nice place i might add.

Dollar a foot seems reasonable rite now. I hope u continue to find good tenants

Thank you for your input! It’s what my financial advisor says as well. Your comment re continuing to find good tenants is my personal and financial concern. It’s a crap shoot and a risk for sure. I also live in the same complex and know it and love it. That said, there are so many nightmare stories about renters but good ones too that makes me go back and forth. The backlash against landlords doesn’t help, as well as upcoming unknowns, socially and politically.

I’m lucky so far. I’m just not sure if I want to roll the dice again though your comment gives me good perspective too

[stuphoto]

Pocogirl,
you almost sound like a dream landlord. Just raising the rent $25 after some improvements is very reasonable.
If I had a family I would be contacting you on it right now.

With that in mind I believe that you will also find some good tenants easily.
Good luck with it.

[LANDM]

Is the gain good enough (after taxes, because the gain is taxable....dependent on your personal situation, of course)?
Does the rent cover your costs? If interest rates go up and you renew your mortgage, will it still cover costs?
Will you be willing to hold on for another five years or a bit more, when the market starts it’s inevitable down-cycle?

It is likely a better idea to raise rents to market but give a good tenant a lower rent, and hold onto it if it covers costs. But your personal situation will ultimately dictate. If you move away, it will be a hassle to look after, for example.

[TylerM4]

Everyone's situation is different. Hard to say for sure if it's the right choice for you.

There is both risk and reward. Can you make it through a 6 month period of receiving no rent? Do you live in the same city and can easily interact with the tennants and inspect the property?

IMO a strata property is idea as a rental. Much of the big maintenance items are covered by the strata, and the neighbors will complain and alert you if they're acting inappropriately.

My though: Keep renting it so long as you're not stretching yourself too thin in the process.

[PocoGirl]

Thanks all for your input. It’s helpful and appreciated.
After mortgage, strata fees, insurance and property taxes, I ‘pocket’ $80 with rent at $,1475.00 so costs are covered except I’m predicting a new hot water tank there this year. Darn! I should have put it to $1,500 lol. The original $1,450 was based on the average rental unit similar to this one in this complex which was actually $1,400. Two years ago, the rent for larger units was $1,500 therefore, I felt I was doing okay at charging $1,450.

My financial situation is that I don’t have a mortgage on my personal townhouse which is located in the same complex and it wouldn’t be an issue if I had to hold the rental empty for the six months or longer that was mentioned by a poster. I don’t have the intention to move away and if so, I’d have to hire a property manager which while not cheap, it’d be affordable but would probably have to eat some of it and/or charge a bit more in rent. Plus those fees can be written off.

On the rental, I’m locked in at 2.79% until 2021 on the mortgage so I’m good there until then and would adjust the rent to absorb any interest rate increase. I’m also considering early retirement this year with the idea of working part time after retirement so selling is on my mind because of it. In regard to selling after the current tenants leave probably in 2019, I did some calculations this morning and on the initial $70,000 deposit (and if the market holds), the pay down on the principal in two years, I’ve more than doubled my $70,000 which is why selling is kind of appealing. In the rental scenario, I’d have to pay for paint, carpet and appliances as I would as if I was selling it which isn’t cheap. I’m not sure I want to have to do it again down the road as with renters there is the risk of damage etc. and quite honestly the security deposit most likely wouldn’t cover the actual cost of repairs and/or replacement.

I don’t have to make any hard decisions for a year or two thankfully but like to think about the options, so hearing from people is helpful as people bring up points I may not have otherwise thought of.

[LANDM]

Look at the changes in the RTA very closely. Your statement that you will adjust the rental rate to cover increases can be very very wrong, dependent on the situation.
Nevertheless, if you can hold for at least five years, think about keeping it. And really, take the rent to market with a break for a really good tenant.

[Ken7]

I don’t have to make any hard decisions for a year or two thankfully but like to think about the options, so hearing from people is helpful as people bring up points I may not have otherwise thought of.

It looks like you have done your homework good on you. Something I have not seen you mention, and did not read all the messages.

What about taxation? The current Government was speaking of changing the taxation on selling homes which are not you primary. It would be interesting to know what percent today you would pay. In the future in a effort to balance his blown out spending, it might be a bit higher then one would like to pay.

[kgcayenne]

What would happen, tax wise, if she sold her primary, moved into the rental, fixed it up, and then downsized later?

[LANDM]

What would happen, tax wise, if she sold her primary, moved into the rental, fixed it up, and then downsized later?

She would have to assign a value to the rental as of when it became her principle residence. That would be the point at which it was non taxable but gains from the initial point to that point would be taxable.

Of course, if it went down in value, it doesn’t really matter but it could create a taxable loss.....which only matters if there are gains to offset against. Personal situations dictate the details but this is generally correct from the information posted.

[Bsuds]

Some interesting info here and it would be prudent to talk to a tax accountant (not Posters) before making any decisions.

http://www.moneysense.ca/spend/real-est ... tax-rules/

[LANDM]

Some interesting info here and it would be prudent to talk to a tax accountant (not Posters) before making any decisions.

http://www.moneysense.ca/spend/real-est ... tax-rules/

Agree 100%.

Even when the poster is me.

[alanjh595]

I also concur. I have been out of the loop in the RE game for years now and I couldn't give you advice based upon my personal experiences. CONSULT A PROFESSIONAL.

That is the best advice that I can offer.

Free advice from a public forum is worth exactly what you have paid for it. Too many biased opinions based upon personal emotions.

Good luck, I hope that you will come back and tell us all how it works out for you and explain what that proffessional has advised you to do, (Just for future reference purposes).

[PocoGirl]

All of your input is great and thanks for the link! It’s good information and I’ll bring it up with my accountant for review next month which could help sway my decision for when tenants move out in possibly 2019 or later. I’d like to keep them as long as possible of course. My financial advisor is the one who originally suggested I invest in a rental when I had the deposit saved up. Part of the plan, as recommended by him, is to hold on to it for 10 years which would be 2026. I’m currently 65% in agreement. Part of me says, stay the course. Part of me says sell when the tenants move out, take the money and run taking into consideration I’ll get nailed with fees and taxes.

Interesting comment about moving in and fixing up. Living in the same complex, my similar unit has a huge backyard because of it’s location and have upgraded my unit to where I love it. I don’t plan on selling until I can’t walk up the stairs lol Also, with the upcoming legalization of pot, this is another potential issue that’s on my mind that I’ll be investigating. In my simple mind, it’s like the no pets, no smoking agreement but it’s definitely an unknown seeing how it’s already going for municipalities and pop up street vendors in Vancouver when technically is’s still illegal. It seems it’s a free for all and ‘do what I want’ without repercussions. Not sure I’m interested in being part of the RTA/Landlord experiment... Like I originally said, it’s a risk to rent out again and just another responsibility. Anyway, it’ll all work out and yes I know forums are the place to make decisions from lol Hence, the professionals... It’s just interesting to hear points of view and I take it with a grain of salt in forums but truthfully there’s been some good input Ps I’ll post here again with developments as they happen :)