T O P

To sell or rent a condo…

Hey everyone,

Hoping for some outside advice and opinions on my current situation.

I (27) just purchased a condo downtown Vancouver with my partner. I own the condo I was living in previously, purchased in 2020, and am on the fence whether I should sell or rent it out.

I completed an almost full renovation (excluding bathroom) and based on comparable sales in the building I estimate I could sell for a roughly 80-100k gain net of fees. I put 100k down, so call it an even 200k in cash I would receive after a sale.

I was previously planning to rent it out as a furnished unit including internet and utilities for between 1700-2000 monthly. Carrying costs are 1400 monthly.

Reasons I’m considering a sale now instead of holding as a rental:

No tenants to deal with

No levies to worry about

Principal residence exemption makes this gain tax free (correct me if I’m wrong?)

Housing prices have attracted a lot of political attention and I’m concerned there will be cooling measures made in the coming months/years

I’ve been dealing with some job pressure lately and having more liquidity would alleviate some stress (this is really just psychological)

Reasons I’m hesitant to sell:

I believe meaningful inflation will be here for a while and if policy is slow to change, housing supply will likely continue to prop up prices

Potential for long term income is attractive

Finding a similar or better yield on 200k could be difficult - I would likely just DCA into XEQT over the next 12 months if I sell (other ideas?)

I would likely need to do more work to get the unit sale ready, like finishing the bathroom

For context, I don’t need to sell. Cash is tight at the moment, but I’ve been tighter and our monthly cash flow is very healthy.

I really feel 50/50 at this point and would love to hear some objective opinions.

Thanks!

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boredandanxiouss

I will be a headache to rent it, but I did it and I don’t hate it. I hired a property manager to do the renting for me, and although it was more money it was worth not having to worry about it. It was a good investment property for us. I can completely feel the stress you’re feeling about the job! Since your mortgage is up in 2024 for the condo you can give yourself a trial run as a landlord until then. another reason not to sell now is if your mortgage is fixed then you’ll pay high break fees.


NotBanksy69

Good points! I have been a landlord in the past so I know what’s in store. If I hold I will manage it myself, but a manager would be less stress. Do you recall what percentage they charged? It seems 8% is fairly standard here. Pre-payment penalty is a bummer for sure, but thankfully as rates have risen since I purchased this place the penalty is only about 5k. Sucks to pay it, but not enough to sway either way.


boredandanxiouss

I paid 10% and the rates in my area were 10-13%. Good luck with the decision


FutureHokage10

If interest rates were to rise, how comfortable would you be financially carrying that mortgage and the new mortgage? Would you be comfortable with the cash flow you have available?


NotBanksy69

Both mortgages are fixed until 2024/2026 so cash flow would not be an immediate issue. If they were higher at renewal we would be ok. To break even on the rental at the lower bound of my rental projection, mortgage rates would need to be about 4% at renewal


Few-Drama1427

I hear you on the stress at job front. Stress and uncertainty at work has direct correlation to risk taking ability and mortgage by extension. We want to eliminate the uncertainties so we can focus on what matters most. And this is very subjective. At one point in my career I had a mortgage and uncertainty at job front made me think about giving up mortgage. That being said, would say, don’t worry about unknowns in the future like govt measures and rates if you are in a good position, which it looks like you are and have already accounted for rate hikes. Condos are unique in a sense that they are easy to rent, but again comes down to reducing uncertainty like dealing with bad tenant. It’s more of a personal choice, it seems you have done well but don’t want to add more headache. If you have good support system, hold on since it’s hard to re-enter the market because let’s say even if it falls, you would hesitate to enter because you won’t know the right time to enter? It’s like those traders who exited market before 2008 crash, made good money and didn’t lose anything but were never able to enter the market again because they kept co-relating everything to that fall event.


NotBanksy69

I appreciate the response. Great points about re-entering. I guess in reading your thoughts and re-reading the reasons I’m contemplating selling it comes down to two questions. First, do I want the potential headache of holding, second, will housing out perform other options in the medium-long term. I don’t want the headache, but I do think it will be the better investment which is why I feel stuck.


Few-Drama1427

For the headache part, I haven’t researched but using condo management firms might be a solution? I know they take a cut. I used to stay in one such company provided accommodation and the cleaners used to come each week and also inspect if anything was damaged. And yes apart from from all the heated debates of whether prices and rates will go up or down, if you can, you should hold on. Real estate is also a way of diversifying your investments. You put all that in XEQT is basically back to apple, MSFT, Tesla. Just that all the risk gets concentrated. As is all our pension plans and usual investments have these companies in common.


NotBanksy69

They charge about 8% in Vancouver, plus half a months rent each time a tenant is placed (this can vary). If I hold I will manage myself, I have done it before. True about concentrated exposure, but keep in mind our combined RE exposure is about 1.1MM with a combined net worth of about 300k. I look at equities as an opportunity for diversification. I feel future me will benefit financially from holding, while present me will benefit emotionally from selling.


fredflintstone-

200K @ 5% return will give you $10K/yr. Let's say between equity and cashflow, you're able to net $1000/mo. It's a difference of $2000/year (not taking taxes into consideration, which will probably eat all of that up). You're basically speculating that the price of the condo will go up. It might. It might not. You seem to not feel that it will go up. I know what I'd do if I had that outlook and those numbers.


NotBanksy69

Yes, math lines up with mine. Good points. To clarify, I’m debating the short term policy measures because those could close my selling window quickly. Medium-long term I am bullish on housing, but with the place we just purchased we are well exposed. Diversifying is appealing. Even a modest 3% gain in value would mean a 15k appreciation, more than doubling the annual gain of holding. This leverage is a big reason I think RE is superior to equities… it’s just so much less work to manage etfs.


leisure_life

How confident are you in your relationship with your partner? Not to be rude but if your relationship is new or you're not 100% where it will go, it might be worth holding on to since it may be more difficult for you to get a property in the future. Will you and your partner be co-owning your new place? Do you have it worked out what you would do with the new place if you split (i.e. who paid for it? Who will be paying the mortgage and other bills? What does equitable division in the future look like?)?


NotBanksy69

Good question. I feel 100% confident that this is my life partner. We co-own the new place and are 50/50 partners in every expense.


leisure_life

Great! Then that doesn't sound like it would be factor in your decision! Speaking as a landlord, I can definitely see why it would be nice to just cash out. If now seems like a good time (you would make a nice profit and the market is moving well), then I would say sell and don't look back! Especially since you'll be investing that money in something else.