Converting primary to rental and moving on dilemma.

[CarrieKoch]

Say you had only 35k left on your primary mortgage home worth 250k. You purchase new home for 290 and want to rent old home. How would you structure financing for both houses ?

My brother has found himself in a pickle (what I think is a great opportunity for him). His wife is sahm and they have 3 small children. Just 30 they've worked to pay off mortgage as quick as they can.
Now they've purchased a home but can't sell.
They are afraid of risk and they feAr debt.

I want to show them that even keeping this house for 5 years will help them out so much.

 

[LAndersen]

We recently did the same thing, converting our old primary into a rental. However, we did this because we chose to and to keep the old place as a rental property. From what you say, I see this as a great opportunity to have a great high positive cashflowing asset which can help him out. If he doesn't want the headaches of managing the property, perhaps it would be a worthwhile venture to help him find a well qualified property manager in his area who specializes in single family homes.

 

[invst4profit]

Overcoming there fears may not necessarily be a good thing for you to take responsibility for.



There are obvious tax advantages to debt in some cases however converting a personal residence to a rental is not always as positive a experience as some may think.

To begin few renters will ever have the respect for your property as a home owner would. As a landlord we expect excessive ware and tear not usually inflicted by a home owner. In addition the value of a rental property is generally directly reflected by the rental income amount.

As mentioned there are numerous potential headaches created by becoming a landlord that should never be ignored.

A landlord must not only have reserve funds to inject into there personal residence but also that of a rental property. In addition the expense and timing of repairs is far easier to control and budget on a personal residence than a rental property. Repairs on rentals are expected to be done yesterday.



The list of cautionary notes goes on and on but is not intended to dissuade a investor from entering the income property business. It is intended to dissuade a individual unfortunately placed in the position of owning a property they are unable to sell to falsely believe renting is a easy option.



In is my experience that the average homeowner would detest being a landlord and cringe at the thought of seeing there home degraded to the status of a rental property.



Also in Ontario a tenants rights far out strip the rights of a landlord. In theory once rented tenants can stop paying rent and the landlords only recourse is to hope the LTB will authorise a eviction, which is rare. Many tenants know they can go many months without paying rent, destroy a landlords home and never be held responsible for it. Professional tenants can go years without paying rent and ultimately simply walk away.

In Ontario if a landlord depends solely on rental income to pay the mortgage the are teetering on a dangerous precipice on a monthly bases.

Also once a property has been converted to a rental a tenant may legally stay forever provided they continue to pay rent and cause no trouble. Sale of a home with a tenant in place requires the purchaser to evict once they take ownership of the property for personal use. Again many months if the tenant resists making selling in some cases difficult.



I personally would tread lightly in your desire to convince a reluctant brother to become a landlord in Ontario.

 

[Thomas Beyer]

Consider getting a new mortgage on the rental such that it safely cash-flows .. say 60-75% .. then use that cash to buy a new home with a smaller mortgage.



Then the mortgage's interest is tax deductable, you build equity in two homes and build a safe pension independent of the stock market !