Temporary Renters?

Question

Hi Guys I havent been around in a while but I need some advice in the situation I'm in.

I bought a condo last year, its beautiful, top floor 2 bedroom, 2 bath , 3 years old. I was planning on living in it for 5 years or more until I moved onto a house.

But I got injured at work and developed CRPS in my left arm which sucks, I can't do construction anymore, and I'm being sent back to school on disability, and plan on doing a Business Degree. With all of this happening I decided to move back home to be with my family (3500km's away) on the other side of Canada.

So I really need advice on what to do with this property. I need to leave to start school in about a month max. I have talked with a landlord who would take care of it. She charges half first months rent and 10 percent of each month. Which would net me a loss of about 200 dollars a month.

Or I could sell the property and basically after realtor costs and prepayment penalty I'd be pretty close to breaking even after spending 10,000$ on a downpayment last year.

I am actually moving back home with family so I will not be paying rent and I can handle paying a 200$ loss for the time being but I was thinking I will keep my eye out for a Rental Investment Property down home and when I see one I can "transfer or port the mortgage". Like a duplex or something, That way I keep my mortgage  going, I wont have to come up with another downpayment , pay any penalties , or mortgage insurance again.

Does this sound like a good idea?

I havent talked to the landlord lady about thinking of selling it yet though? Has anyone ever rented a place out with intention of selling it in 6-12 months? How much notice do I have to give the tenants?

Thanks guys, I apoligize if I'm pretty confusing, its a rough time right now.

Andrew

Jon Holdman · Answer

The management fees you quote are standard for our area.

I'd sell and be done with it.  Not sure if you mean you walk away with $15000-17000 which is how I'd read "being up $5000-7000" when combined with your $10,000 down payment, or if you mean you'd walk away with $5-7K.  Either way, I'd sell.  In the first case you're actually turned a profit.  In the second, the cost of you "renting" this condo during the time you've lived there is pretty reasonable.

As a rental, this is a serious loser.  Your best case (i.e., the "phony cash flow = rent - PITI (and HOA)) is just break even.  The reality is that things do go wrong.  At the very least, you'll have some vacancy.  Very likely you'll have some small maintenance, and since you'll be far away, you'll have to pay somebody to deal with trivial issues.

Plus, you just don't need the headaches of trying to deal with this from a distance.  Sell and move on.

Sorry to hear about the CRPS.  I'd never heard of that, so google educated me.  That sounds nasty.  Really sorry.

Chase T. · Answer

Sell. Not worth your time or potential future tenants trashing it completely. Owning condos and renting them out rarely, if ever works out financially.

Andrew B. · Answer

I spoke to some family down home that are very much into real estate and they are going to talk to some friends and see if they can find me a good property.

I have to paint the sparebedroom this weekend and I think im going to take the advice you guys are giving me and sell it, I am not losing yet.

Will be listed early next week with any luck.

Andrew B. · Answer

Sorry guys I have the figures all messed up. Here are the ACTUAL

I originally bought the place for

222,000$

I owe 214,000$ as of right this second.

I could sell for 232,000$-240,000$

I lived in this place for a year and put a total of about 12,000$ into mortgage insurance and downpayment/lawyer fee's etc to get into the place

Rich Weese · Answer

Andrew- if you bought a CONDO less than a year ago and can sell now for a 50-70% profit, you should be teaching SEMINARS!!!!
     I'm not big on condos, so I'd sell, take the profit and run. Save the funds and buy a house when you're ready. This real estate mess is not over here in the U.S., and would assume Canada might see the same
     10% mgmt fee is pretty standard here in states I've been in for managing a single property , and especially a condo. More headaches because of the HOA. Good luck with the schooling and take the money and run, imo. And congrats on making profit in this economy without trying! Rich

Andrew B. · Answer

I dunno, maybe I should get looking for a new place back home already? And sell and transfer the mortgage right away.

Andrew B. · Answer

Payment + Tax- 1085 /mth
Condo Fees : 253/mth

1338 total

The most it would rent for would be 1400, likely 1350.

The only reason why I'm considering keeping it is because I will have to pay a 3000+ penalty for paying out the mortgage to soon. So I figure if I keep it until next spring 8 months X 200 loss = 1600.

Then I will have found a property in my new city and transfer my mortgage.

Steve L. · Answer

10%/mo is an extremely high management fee, especially for a condo.

Would the property cashflow?  What is your pmt, rent, and HOA?  Would you ever plan on moving back to the area?

I'd probably sell it and save money until you decide where you want to end up long-term, but if you give more info I can answer better.

Andrew B. · Answer

Sorry if I sold it right now after all fee's I'd be up about 5 to 7 thousand. but if i waited till next spring I could probably get more.

The penalty will be somewhere in the range of 3000$ if I wanted to get out of it aswell.

If I transfer it it will not cost anything. I was thinking of buying a duplex back home.

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