Real Estate

Advice Needed: To sell rental unit or keep it until ready to purchase another property

  • Last Updated:
  • Jul 24th, 2020 4:42 pm
[OP]
Deal Addict
Feb 11, 2013
1079 posts
243 upvotes
ON

Advice Needed: To sell rental unit or keep it until ready to purchase another property

Hi All,

I just wanted to get advice on how people would approach my situation. We're currently renting and initially purchased a property close to Brantford but decided not to move (long story short: due to spouse's career change etc -we're both now working in DT)

-Where we're living right now, we're paying rent of $2000 which is reasonable since most units are going for $2,200+ (we've been here for a few years and landlord knows us)
-We put our new property on rent and we're losing approx. $260/month, after all the expenses etc. However, our interest rate is low so each year we rent it out, we build equity by approx $15K.
-If we sell our property, we will most likely only make $10-$20K max after considering all the expenses (commission, closing, etc). Market isn't that great
-We don't need a house right now but in a few years we might as our family is growing. We're also putting money aside on a monthly basis.
-If we want to purchase another property, we would have to save up a lot since most of the savings were put towards the rental property.
-We could continue to rent but if the landlord decides to sell then we'll most likely have to pay more to rent in the same neighborhood.

Looking for advice/general thoughts on how people would approach our situation.

Thank you
Last edited by Pursuit2013 on Jul 24th, 2020 12:48 am, edited 1 time in total.
6 replies
Member
May 4, 2010
260 posts
253 upvotes
Ottawa
I'd be worried about selling a rental with a tenant in it right around the time you need to buy, so my preference would be to start the selling process now.
Deal Addict
Mar 2, 2017
3240 posts
6204 upvotes
Toronto/Markham
Pursuit2013 wrote: Hi All,

I just wanted to get advice on how people would approach my situation. We're currently renting and initially purchased a property close to Brantford but decided not to move (long story short: due to spouse's career change etc -we're both now working in DT)

-Where we're living right now, we're paying rent of $2000 which is reasonable since most units are going for $2,200+ (we've been here for a few years and landlord knows us)
-We put our new property on rent and we're losing approx. $260/month, after all the expenses etc. However, our interest rate is low so each year we rent it out, we build equity by approx $15K.
-If we sell our property, we will most likely only make $10-$20K max after considering all the expenses (commission, closing, etc). Market isn't that great
-We don't need a house right now but in a few years we might as our family is growing. We're also putting money aside on a monthly basis.
-If we want to purchase another property, we would have to save up a lot since most of the savings were put towards the rental property.
-We could continue to rent but if the landlord decides to sell then we'll most likely have to pay more to rent in the same neighborhood.

Looking for advice/general thoughts on how people would approach our situation.

Thank you
To clarify, you are not "losing" $260/month, is that the top up you do to cover your carrying costs of the property? Consider that as forced savings/equity. If the rent is paying your interest portion of your mortgage payment/prop tax/etc then the $260 is going directly into equity.

Looks like you are in a decent position for now with a below market lease, I'd consider staying put and keeping the home that you own. This is a very simplistic answer however to something where we really have no idea what your priorities or high level cash needs area, fyi.
RE Broker
[OP]
Deal Addict
Feb 11, 2013
1079 posts
243 upvotes
ON
introspect wrote: I'd be worried about selling a rental with a tenant in it right around the time you need to buy, so my preference would be to start the selling process now.
Sorry I meant I'd consider selling once the lease was up.
[OP]
Deal Addict
Feb 11, 2013
1079 posts
243 upvotes
ON
You're absolutely right and the way I'm looking at it, I'm technically gaining $15K in equity less $3,000 in carrying cost for the year = $12,000. I'm not a finance guy so correct me if my thinking is incorrect.

We also think we're in a good position as long as we stay put and our landlord doesn't sell.
Last edited by Pursuit2013 on Jul 23rd, 2020 10:40 am, edited 1 time in total.
Deal Addict
Jul 8, 2013
2888 posts
4568 upvotes
Somewhere in AB
Pursuit2013 wrote: You're absolutely right and the way I'm looking at it, I'm technically gaining $15K in equity less $3,000 in carrying cost for the year = $12,000. I'm not a finance guy so correct me if I'm thinking is incorrect.

We also think we're in a good position as long as we stay put and our landlord doesn't sell.
One of the surest ways to build wealth is via real estate. I'd say stay put, keep on renting out your unit and re-evaluate if you get kicked out of your current place.
Be Balanced. Be Diversified. Stay Invested.
Newbie
Mar 28, 2008
51 posts
23 upvotes
Toronto
Personally I think that you should move in to your property or if you can not do it because whatever reasons (too far from your work, etc), you should sell it and buy a place that you can stay as soon as possible. The reason is that when you sell you rental property, you will have to pay capital gain on the profit. You don't have to do it if it is your principle residence. You can however, fill in an election so that the capital gain from selling the property can be exempted because you work far from the house and you can not stay there for example. However, I think the maximum time is 4 years (or 5 years) and you also need to prove that you stayed there before selling the property. I think you should consult with an accountant for that. Giving the housing market now the capital gain can be substantial.

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