Welcome!

By registering with us, you'll be able to discuss, share and private message with other members of our community.

SignUp Now!

Do I hold or sell?

JROC

0
Registered
Joined
May 27, 2008
Messages
59
Hi All,

I bought my first investment property - condo in 2007. Paid $71,000. Vacancy rates were 0% real estate prices on the rise then 2009 hit and Williams Lake has never recovered. Vacancy rates are about 10%, real estate prices are down. Don't see any economic upside to Williams Lake in the near future. Finding good quality tenants are hard to find with a small population of 12,000.

Current monthly numbers;
Rent $725

Strata $232
Insurance $26
Mort and Pro Tax $362
Pro Management $72.50

Cash Flow $32.50

If I sell today condo is worth apporx $63,000 minus realtor fees about $58,000 in my pocket.
Paid $71,000
After costs to sell $58,ooo
Lost $13,000 in the difference in price. But in 9 years also paid down approx $13,000 in mortgage. If I were to sell this would be a break even deal maybe a little positive with the monthly cash flow over the 9 years.

This was my first investment property that I bought after reading one book. Learned a lot but I would never buy in another small market.

Open to opinions do I hold or sell?

Thanks!
 
Last edited:

kfort

0
Registered
Joined
Sep 1, 2010
Messages
1,578
My evaluation goes like this:

Is my money better somewhere else? If yes, continue to next question. If no, drink beer.

What is the expected liquidated $ to pain in my rear ratio? If high, continue to next Q. If skewed to pain in rear, drink beer.

How much better is my money elsewhere? If substantially, call Reagan (realtor). Is marginally, drink beer.

Hopefully that helps you some
 

Thomas Beyer

0
REIN Member
Joined
Aug 30, 2007
Messages
13,881
Is the outlook at least inflationary (2-3%/year) for rents & vacancies ? If so, consider keeping it. If not I would sell.
 
Last edited:

Matt Crowley

0
REIN Member
Joined
Dec 14, 2013
Messages
980
Personally, I would sell. Real estate is too much risk to have with no potential of upside (if your expectations of economy are correct). Nothing wrong with RRSPs, TFSAs, or just putting the money against your own home. Margins too small for me.
 

JROC

0
Registered
Joined
May 27, 2008
Messages
59
Thanks for your opinions.
Matt I own 4 other rental properties in a different market, that are doing very well. Love real estate investing. I do have RRSPs, TFSAs. I agree margins are way too small.
 

Alvaro Sanchez

Ottawa-Gatineau Investor
Registered
Joined
Jun 5, 2009
Messages
966
I would recommend to sell it and focus on something with better returns as this property is just a distraction unless you are doing for "practice". Time is one thing you will never get back so invest your time in better deals.

Hi All,

I bought my first investment property - condo in 2007. Paid $71,000. Vacancy rates were 0% real estate prices on the rise then 2009 hit and Williams Lake has never recovered. Vacancy rates are about 10%, real estate prices are down. Don't see any economic upside to Williams Lake in the near future. Finding good quality tenants are hard to find with a small population of 12,000.

Current monthly numbers;
Rent $725

Strata $232
Insurance $26
Mort and Pro Tax $362
Pro Management $72.50

Cash Flow $32.50

If I sell today condo is worth apporx $63,000 minus realtor fees about $58,000 in my pocket.
Paid $71,000
After costs to sell $58,ooo
Lost $13,000 in the difference in price. But in 9 years also paid down approx $13,000 in mortgage. If I were to sell this would be a break even deal maybe a little positive with the monthly cash flow over the 9 years.

This was my first investment property that I bought after reading one book. Learned a lot but I would never buy in another small market.

Open to opinions do I hold or sell?

Thanks!
 

JROC

0
Registered
Joined
May 27, 2008
Messages
59
Thanks again all for your advice.
Do I list the property now and get rid of it? I don't see the condo market declining that much or at all in 2017. The reason I ask is because I have a 5 year fixed and the mortgage renewal date is in JUNE 2017. There will be penalties to pay if I sell before hand and break the mortgage. Was thinking of listing it in April / May 2017?
 

kfort

0
Registered
Joined
Sep 1, 2010
Messages
1,578
Do I list the property now and get rid of it?

What are you going to do w that $ If you sell?
What are you estimating to lose monthly in mean time ?
What is principle paydown in mean time?
What is expected appreciation or depreciation of the asset now -> July?
What is your exact payout penalty? (Call the bank)

This is a math question. Numbers don't lie unless you're lying to yourself w numbers. ...Or maybe don't know your market accurately enough I suppose.

Take your heart out of it, investment real estate buy/ sell decisions have no feelings.
 

JROC

0
Registered
Joined
May 27, 2008
Messages
59
What are you going to do w that $ If you sell?
What are you estimating to lose monthly in mean time ? Assuming no cash calls losing -$44 a month
What is principle paydown in mean time? Approx $1925 principle paydown for 2016
What is expected appreciation or depreciation of the asset now -> July? I expect the market to be flat 2017
What is your exact payout penalty? (Call the bank) Called Scotia a couple days ago looking at $600 penalty + any admin fees they will charge

This is a math question. Numbers don't lie unless you're lying to yourself w numbers. ...Or maybe don't know your market accurately enough I suppose.

Take your heart out of it, investment real estate buy/ sell decisions have no feelings.
 

kfort

0
Registered
Joined
Sep 1, 2010
Messages
1,578
Are you making $32.50 or losing $44? I was talking about principle paid down in remaining duration of term, not in the past. And what does $600 + admin fees work out to? Don't spend time thinking on hundreds of dollars when you should be spending time thinking on hundreds of thousands.
 

JROC

0
Registered
Joined
May 27, 2008
Messages
59
Hi Kfort,
#1 I posted the numbers last week, things have changed a bit. Got a letter from the bank, Scotia collects my pro tax and mortgage together on a monthly basis and as of Nov my monthly mortgage / pro tax has gone up. I will be in the negative $-44 a month.
#2 Great point about not thinking of hundreds of dollars but hundreds of thousands!
#3 Forgot to mention that when I sell, whatever money is left over after paying off the mortgage, realtor fees etc. I will put it on my line of credit.
Thanks again for helping me think about things differently!
 

kfort

0
Registered
Joined
Sep 1, 2010
Messages
1,578
$600 penalty (if that is accurate) is the same as zero in my opinion and would not affect my personal choice. Again, don't create work and hassle over hundreds of dollars. Talk to a condo board member and find out state of affairs re: cash calls. Keep an eye on average DOM as well as the market for the next 6 months (tap a reliable realtor sometime after the holidays).
 

Thomas Beyer

0
REIN Member
Joined
Aug 30, 2007
Messages
13,881
Occupied condos are very tough to sell. Consider a sale when vacant after local research and talk to a realtor.

Is this a former IPG or 20/20 condo conversion ? Is this in a rental pool ?

I'd dig in for the long term and hold and spend as little time on it as possible if cash flow is close to zero ( which $44 is).

There is return on cash, and there is return on time. Cash can be replenished ie you can always make more, later. Once a day is gone or a wasted week it is gone, however, forever.

So if you assume zero cash flow and zero equity upside but mortgage pay down of $2500/year and you spend 2h a month on it max that is $100/h ! If you spend 2h/quarter that is $300+/h !!

Eventually the mortgage will be zero. Perhaps buy some more even, from distressed sellers for $60,000 or $1 to mortgage.
 
Last edited:

kfort

0
Registered
Joined
Sep 1, 2010
Messages
1,578
If you hold long term get a real good handle on the state of finances from an ENGAGED board member. No need to hold at break even for 2 years and walk into a $4,000 cash call in year three for new windows/ doors or parking lot etc.
 

Thomas Beyer

0
REIN Member
Joined
Aug 30, 2007
Messages
13,881
If you hold long term get a real good handle on the state of finances from an ENGAGED board member. No need to hold at break even for 2 years and walk into a $4,000 cash call in year three for new windows/ doors or parking lot etc.

That is good insight. Before I launched my ascent from $80,000 condos in the early 2000's I spent a few years as a condo board member. Great learning experience and a good way to shape the property's direction, too !
 

housingrental

0
Registered
Joined
Oct 10, 2007
Messages
4,733
I would sell.
It is taking up your time and mental space.
Even if it turns profitable in the future, will it be worth it?
 

Lara Mitchell

New Forum Member
Registered
Joined
Oct 6, 2016
Messages
5
Where is this located? If its in Calgary you are better off to hold until next year. Talking to an economist yesterday and was advised sellers are better positioned early next year.
 

CanadianMortgages

New Forum Member
Registered
Joined
Sep 13, 2016
Messages
2
You need to first identify the opportunity cost of holding versus selling. If you have more capital, then sitting on the property may be the better alternative if the depreciation curve has flattened. Are prices still going down? If they are, it may be best to get out while you can.

If you need the extra cash for another high ROI opportunity, the best option will also be to sell. If you don’t need the cash for anything in particular, you may consider holding out for a while longer if you are able to obtain tenants. This really depends on your time horizon.
 
Top Bottom