Advise on selling or holding rental

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Mar 7th, 2022 1:54 pm

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Mar 5th, 2022 2:22 pm

MooseKnuckles1 [OP]: Newbie; Nov 18, 2017; 11 posts; 1 upvote

Mar 5th, 2022 2:22 pm

Advise on selling or holding rental

Hi all
This has been on my mind for a couple months and I'd appreciate some input.
I have a single family detached rental house in Kitchener. I bought for $265 in 2016 and realistically it would fetch $700+/- today.. I think $650 low end, $800 as a shock.
I moved out in 2018 at which point it became a rental to my first and current tenants. Rent has been throttled by provincial increases and currently is $1915/m. After expenses I'm $415/m cash positive. Mortgage balance is currently $208k.

The tenants have been great, very low key, and I've had no real issue.. which is why I've been fine with well below market rental rates.

I think you know where this is going, I'm looking for input on cashing out.

We (wife and I) only kept the house back then as we could, we were not looking to expand with additional rental properties. We both have secure jobs and above average income, so we don't *need* to sell, only if the opportunity is peak. The gains from the sale would be invested and our plan by 2025 has been for years (since we bought our second home in 2018) to purchase a cottage.

20 replies

Mar 5th, 2022 2:38 pm

teoconca: Deal Guru; Oct 16, 2008; 10293 posts; 4555 upvotes; Maple

Mar 5th, 2022 2:38 pm

I would keep, you have good tenant, your cash flow is positive.

...

+1

Mar 5th, 2022 2:43 pm

DecayHeat: Member; Oct 29, 2015; 414 posts; 232 upvotes

Mar 5th, 2022 2:43 pm

My vote is to keep it.

You've got good tenants and it cashflows.

If you need the cash, HELOC or refi.

+1

Mar 5th, 2022 3:46 pm

Rabbit2k18: Newbie; Mar 1, 2022; 12 posts; 3 upvotes

Mar 5th, 2022 3:46 pm

Keep it. Buy and hold for long term investing.

Mar 5th, 2022 3:54 pm

vanclty: Sr. Member; Apr 23, 2014; 947 posts; 421 upvotes; Toronto, ON

Mar 5th, 2022 3:54 pm

take heloc and buy cottage. keep it, hard to find good tenants.

Mar 5th, 2022 4:09 pm

Worriedone: Deal Addict; Dec 3, 2013; 1227 posts; 2005 upvotes; Somewhere over the r…

Mar 5th, 2022 4:09 pm

Keep, passive income when your retired is a great thing. I would only sell if you had to.

Mar 5th, 2022 4:23 pm

MooseKnuckles1 [OP]: Newbie; Nov 18, 2017; 11 posts; 1 upvote

Mar 5th, 2022 4:23 pm

To be honest, back of my mind was saying keep it, but I was doubting myself. So this unanimous reinforcement helps solidify. As noted I'm not a real estate investor, didn't want to make a mistake by doing nothing so i wanted to have other completely removed weigh in. I really appreciate candid input.

Mar 5th, 2022 5:08 pm

JayLove06: Deal Expert; Feb 29, 2008; 19630 posts; 18164 upvotes; Tarrana & The Ri…

Mar 5th, 2022 5:08 pm

If it's your only rental then keep it. It is going to get tougher to buy rental properties in the future, so it's best to hold on. As someone else has said, if you need cash just HELOC/Refi. Also remember not selling means you don't have to pay capital gains. Rates are also going up and will continue to go up so keep that in mind.

Mar 5th, 2022 5:18 pm

StatikIEV: Sr. Member; Dec 14, 2021; 507 posts; 1248 upvotes

Mar 5th, 2022 5:18 pm

MooseKnuckles1 wrote: ↑ To be honest, back of my mind was saying keep it, but I was doubting myself. So this unanimous reinforcement helps solidify. As noted I'm not a real estate investor, didn't want to make a mistake by doing nothing so i wanted to have other completely removed weigh in. I really appreciate candid input.

Before you do that, think you should also step back and consider the forum you have asked this question.

You might as well have asked, "is real estate a good investment the next couple years", there isn't a lot of objectivity here...especially after the run we have had the last two years.

it's like going into a crypto forum and asking "who thinks crypto is just a fad?". The majority of answers are pre determined, and be wary of any advice that doesn't offer an opinion on both sides of the decision. Not saying the answers you get here are incorrect...just saying to diversify your knowledge pool.

Maybe go over to the RFD finance forums and ask the same question to get some balance?

investing-f134/

+2

Mar 5th, 2022 6:52 pm

licenced: Deal Fanatic; Jul 3, 2011; 6517 posts; 3792 upvotes; Thornhill

Mar 5th, 2022 6:52 pm

Your post lists no downside to holding it.

I'd say keep it.

Reconsider when you start to see a downside which means being vigilant about what the governments may propose to do to investors. Right now, they're not aiming at someone like you and likely will not.

More importantly I think your most likely negative is that because of the lifting of covid restrictions, it is very possible that the GTA exurbs may see some price shrinkage since work from home is what many buyers were betting on. Couple that with gas prices with escalating transit prices may cause a selling off to return to Toronto.

Mar 5th, 2022 7:36 pm

RichmondCA: Deal Addict; Mar 2, 2017; 3407 posts; 6582 upvotes; Toronto/Markham

Mar 5th, 2022 7:36 pm

If it was me and I had a property like that in Kitchener I'd be unloading it and taking advantage of the market, no questions about it.

RE Broker

Mar 5th, 2022 10:08 pm

AcidBomber: Moderator; May 27, 2007; 16050 posts; 4514 upvotes; Toronto

Mar 5th, 2022 10:08 pm

Im with the majority here, keep it, especially its cashflow positive and you have a good tenant.
If you want to purchase a cottage in 2025, take out a HELOC. By then your rental income would have increased.

RedFlagDeals.com
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+2

Mar 6th, 2022 8:11 am

MooseKnuckles1 [OP]: Newbie; Nov 18, 2017; 11 posts; 1 upvote

Mar 6th, 2022 8:11 am

Moved from: Investing

Hi all
This has been on my mind for a couple months and I'd appreciate some input.
I have a single family detached rental house in Kitchener. I bought for $265 in 2016 and realistically it would fetch $700+/- today.. I think $650 low end, $800 as a shock.
I moved out in 2018 at which point it became a rental to my first and current tenants. Rent has been throttled by provincial increases and currently is $1915/m (market value is more like $2300 now). After expenses I'm $415/m cash positive. Mortgage balance is currently $208k.

The tenants have been great, very low key, and I've had no real issue.. which is why I've been fine with well below market rental rates.

I think you know where this is going, I'm looking for input on cashing out in a hot seller's market.

We (wife and I) only kept the house back then as we could, we were not looking to expand with additional rental properties. We both have secure jobs and above average income, so we don't *need* to sell, only if the opportunity is peak. The gains from the sale would be invested and our plan by 2025 has been for years (since we bought our second home in 2018) to purchase a cottage.

Last edited by MooseKnuckles1 on Mar 6th, 2022 9:53 am, edited 1 time in total.

Mar 6th, 2022 8:55 am

DaveTheDude: Deal Addict; Mar 3, 2018; 3080 posts; 3456 upvotes; GTA

Mar 6th, 2022 8:55 am

Being the property is in Kitchener it has benefited from the covid WFH craze. As this is starting to reverse somewhat there is a significant risk that KW area prices will adjust as people migrate back to the GTA. You also have rising interest rate risk that means less dollars available for purchasers. The investment opportunity has peaked for now in KW.

I would be cashing out to other investment opportunities. Investors should view real estate differently then home owners who need a place to live and can ride out long periods of price adjustments.

Mar 6th, 2022 9:43 am

teoconca: Deal Guru; Oct 16, 2008; 10293 posts; 4555 upvotes; Maple

Mar 6th, 2022 9:43 am

It seems you want to cash out. It is best for you and wife.

...

Mar 6th, 2022 9:55 am

htiek: Member; Sep 14, 2009; 273 posts; 540 upvotes

Mar 6th, 2022 9:55 am

Property is cash flow positive. You’re in a secure financial situation. Truth is you have no real need to cash out.

Your real question would be, what other projects can you reinvest the proceeds into, to get you a higher return in the future?

If you reinvest into something else (let’s say people usually buy multiple pre-con and grow from that 1 investment property into 3 condos or 2 pre-con townhouses in GTA or Toronto), do you have the borrowing power to take out multiple mortgages? If not, do you plan to flip as assignments? These moves would likely cause you to be cash flow neutral or even slightly negative, but the growth potential in terms of price appreciation would be much higher.

Mar 6th, 2022 12:35 pm

wamartin: Newbie; Jun 28, 2012; 75 posts; 58 upvotes; Ontario

Mar 6th, 2022 12:35 pm

Would it change people's opinion if it wasn't cash flow positive? I'm in a similar situation to OP except my rental has been carrying a shortfall of about $150/month for the past several years. Currently I'm fine with it as the appreciation far outweighs the shortfall. But thinking of selling it in a year or so and putting that money into some ETF's as it's slowly becoming a hassle (repairs, etc.) and I'm not looking to build a rental portfolio.

Mar 6th, 2022 12:37 pm

Meeeks85: Jr. Member; Dec 26, 2012; 170 posts; 102 upvotes; RICHMOND

Mar 6th, 2022 12:37 pm

I’m on the same boat with good tenants. We bought ours similarly priced and. Value today is similar. The idea of paying capital gains made us decide to keep it.

+1

Mar 6th, 2022 1:08 pm

cil254: Deal Addict; Dec 18, 2002; 3101 posts; 299 upvotes; GTA

Mar 6th, 2022 1:08 pm

I'm assuming you would have to bay taxes on the gains which could be pretty painful depending on your tax bracket.
In the meantime renting helps paying down the mortgage by writing off interests and expenses and still gives you positive cashflow.
I would keep unless you need the cash now or have a good investment strategy for the post taxes proceeds that could give you comparable cashflow for the foreseeable future.

Mar 7th, 2022 1:04 pm

isd9999: Member; Aug 20, 2016; 425 posts; 375 upvotes

Mar 7th, 2022 1:04 pm

I have a rental property in Cambridge.
I am much older.
I keep it for the income it is not much but less money in the stock market.
I have a good tenant she gets a steal rate since she has been there for a long
Is real estate overvalued? Probably I do not care. My houses are not my retirement plan and should be noone's retirement plan. If I have to sell one it will be when I am 90 and have no other choices.
3 choices:
House
Apartment
Live in a park
I own 3 houses and have a some car.un stock so I am covered.

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