When to sell aging investment condo?

DaMan12 wrote: ↑ What's your plan to use the money for? If it is to buy other real estate that is a money losing idea due to all the transaction costs.

Madal123 wrote: ↑ We have a 1br condo in Mississauga that's around 22 years old now. We bought just 1.5 years ago and although its cash flow negative, it has done well in appreciation, especially the last six months.

The condo itself is in great condition, well maintained, has been renovated, and management is good as well with a strong reserve fund. Maintenance fees are still under $400 with all utilities.

I would like to keep it long term but concerned that age will be a factor when trying to sell it down the road. Even for rentals it feels less competitive with newer builds.

If we were to sell it, buying a new condo at these prices would put us in a worse situation in terms of cash flow and debt.

At what point does it make sense to take your gains and move on? For another property should we be looking at areas further from the GTA? Or are investment properties at these prices no longer possible?

Chickennbeans wrote: ↑ I think there are a few different items to consider.
1 Is the building not well taken care of? (about to run up the costs)
2 Is it in a relatively good rental area/cashflow
3 Do you need the funds?

First, I'm surprised that you're asking this now, specifically because you note that it was purchased only 1.5 years ago. It would have already been >20 years, when you bought it. Did something change?

Your second paragraph indicates that #1 isn't a concern - are you sure it is in fact a 'strong' reserve fund? A building about that age should be about to hit a massive amount of major reno's in the next 10-15 years, or you start to see things fall apart. I would be concerned if it had less than $20-30k/unit in the reserve at this point, unless a lot of non-aesthetic replacements have recently been completed.

Personally, if you're negative cashflow, it makes sense to keep the cash-out option on the table. Being a landlord does take some effort, but at the same time, pricing for new condos are $$$$ and run the risk of being run into the ground from the start by an ignorant board.

Madal123 wrote: ↑ When we bought it, it was really the only/best option in our range at that time. We just wanted to get in the market with a 2nd property to take advantage of appreciation.

It's in a good area, by square one and even though it's older we haven't had too much of a hard time finding tenants (on our second tenant now). We try to price a bit lower than the newer builds.

We don't need the funds at all (unless buying a replacement property). More of a question of when to get out before things take a turn for the worse due to age. We are losing about $350 each month in cash but don't mind as long as resale is strong.

The reserve fund is just under $13k per unit. They've already done some changes like updating the underground parking structures. The last reserve study doesn't indicate any expectations of major repairs that can't be covered by the fund.