Would you refinance and look for additional property?

[seven3]

Hello, your experienced input is much appreciated! I`m looking for some opinions on the options I`m considering..

Background:
- Own a 900 sq. ft. condo in the Lower Mainland; had offers in the $345-$350k range
- Approx. $55k left on the mortgage - so equity of about $280k (after realtor commissions)
- Objective is to be able to move into a larger space for the family (e.g. a townhouse in the $425k ish range probably)

Would you:

1) Refinance Condo and Rent Out - Refinance the condo to take some equity out as a down payment on a townhouse. Rent it out to cover the mortgage and monthly strata maintenance fee (average $1200 rent to cover the $900 mtg payment, $200 maintenance fee and property tax)

2) Sell the condo. Purchase a townhouse to live in and a better yielding property somewhere else (but I`d likely incur more transaction costs this way).

3) Forget out moving to a townhouse until we have more equity - we don`t NEED the space yet. Maybe purchase a second condo with the equity and rent it out - if prices fall further first.

Based on our current combined income I anticipate that we can cover both mortgages should there be vacancy - also have the objective of forming a reserve to cover 6 months of mortgage costs and maintenance fees on the condo.

Thanks for your feedback!

 

[realfortin]

QUOTE (seven3 @ Feb 23 2009, 06:27 PM) Hello, your experienced input is much appreciated! I`m looking for some opinions on the options I`m considering..

Background:
- Own a 900 sq. ft. condo in the Lower Mainland; had offers in the $345-$350k range
- Approx. $55k left on the mortgage - so equity of about $280k (after realtor commissions)
- Objective is to be able to move into a larger space for the family (e.g. a townhouse in the $425k ish range probably)

Would you:

1) Refinance Condo and Rent Out - Refinance the condo to take some equity out as a down payment on a townhouse. Rent it out to cover the mortgage and monthly strata maintenance fee (average $1200 rent to cover the $900 mtg payment, $200 maintenance fee and property tax)

2) Sell the condo. Purchase a townhouse to live in and a better yielding property somewhere else (but I`d likely incur more transaction costs this way).

3) Forget out moving to a townhouse until we have more equity - we don`t NEED the space yet. Maybe purchase a second condo with the equity and rent it out - if prices fall further first.

Based on our current combined income I anticipate that we can cover both mortgages should there be vacancy - also have the objective of forming a reserve to cover 6 months of mortgage costs and maintenance fees on the condo.

Thanks for your feedback!
You will get many different views and mine are one the non risk-adverse end of the spectrum. I would sell the condo and take the 280 (-about 6% after all the closing costs), I`m assuming you are in BC. Find a modest townhome that meets your needs, (425k?) with 5% down (let`s say 10% with all the closing costs) and take the 200K+ left over to find suitable rental properties that fit most of the guidelines in a good area. It means doing a lot of research, probably out of the lower mainland and getting a place that will get you closer to your Belize... Then you`ll still have a lot of money, so take what you learned from the 1st property and improve on it... again and again.

my 2 cents, worth only about 1.3 cents after taxes.
Real Fortin
Budding investor
Managing my 2 properties in Ontario from Haiti

 

[Nir]

It depends on your goal seven. if for example you want to maximize your cash flow then OBVIOUSLY you must sell your condo and use the 280K as Real mentioned.
That`s what I would do without a doubt. Good luck.

 

[housingrental]

Yup I`ll third it - the rent to value of your condo doesn`t work for me - sell it

 

[Thomas Beyer]

QUOTE (housingrental @ Feb 24 2009, 06:24 PM) Yup I`ll third it - the rent to value of your condo doesn`t work for me - sell it
I`ll side with this comment .. not much immediate upside in smaller condos in Vancouver area due to overbuilding / inventory .. plus 340K for $1200 in rent is a poor ratio: sell it .. and buy THREE properties in a smaller town for 90 - 120K that rent for $800 to $900 ..

 

[EdRenkema]

QUOTE (thomasbeyer2000 @ Feb 24 2009, 09:00 PM) I`ll side with this comment .. not much immediate upside in smaller condos in Vancouver area due to overbuilding / inventory .. plus 340K for $1200 in rent is a poor ratio: sell it .. and buy THREE properties in a smaller town for 90 - 120K that rent for $800 to $900 ..

Thomas and Adam are correct but you are assuming the $340K condo can actually be sold for that price if at all. I needed to sell my condo in SE BC last summer, 2 viewings in 3 months and I did drop the price below market - nothing. If there are no buyers then it can`t be sold, ever try to sell an impossibly good deal? Sometimes it just does`t work.

 

[realfortin]

QUOTE (EdRenkema @ Feb 25 2009, 07:58 AM) Thomas and Adam are correct but you are assuming the $340K condo can actually be sold for that price if at all.

Seven mentioned that he/she had offers of 340-350, so we can make the assumption that it is what can be had in the market these days for that condo, it was probably worth 400k last year. Even if seven does not get that due to the market conditions, those same market conditions will be in seven`s favour when buying a personal townhouse. I would say that the higher priced townhouse would be discounted more than the lower price condo. Rel estate agents in BC have stated that the 400K+ places are not moving but the ones in the sub 400K pricepoint are selling more and more this winter.

Real

 

[RobMacdonald]

I`d also be on the side of selling the condo. With the equity you would have left in the condo, you can do much better in several other regions of Western Canada.

This all depends on your long term goals.........