ykphil
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Cash: $ 0.45
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Joined: 23 Nov 2009
Location: Yellowknife
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| Selling vs. Renting |
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I own a mortgage-free house worth around $425,000 and I am relocating to Calgary to start a new job. I quit a very lucrative executive job (that I hated) to take a much lower paid job (that I love), and without a rental income, or selling my house, I will not be able to afford living in Calgary. Luckily, I don't have any loan, debt or financial obligation. I am debating whether it would make more financial sense to rent the house or sell it. I have a serious and reliable person who is willing to rent my house for $1,900 + utilities on a 2-year lease. The only expense I would have to incurr are municipal taxes (annually $2600). The house is in good condition and would likely not require any upgrade or significant expense in the next few years.
I don't know much about investing and real estate, but my thinking is that it would be more advantageous for me to rent the house, use its equity to buy a property in Cagary, and use the rent money to pay for the mortgage and other monthly housing expenses. I'm also thinking that keeping my house would allow me to sell it at a higher price when the economy gets better.
I would appreciate any recommendation on what the best option would be in my situation.
Thanks in advance.
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Mon Nov 23, 2009 6:29 am |
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coaster
Senior Advisor
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Location: Wisconsin
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You would have to be an absentee landlord. Do you know the interested party well? You're going to be depending on your assessment of reliability. Other than that, I concur with your thinking, though I haven't run the numbers, something that can be done in a spreadsheet if you're computer-literate.
Holy moly -- your property taxes are LESS than on my $130K-assessed house (and, yes I did the conversion -- wow!! loonies have been rocking!!) 
~Tim~
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Mon Nov 23, 2009 6:47 am |
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ChestertheInvestor
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Location: Boulder, CO
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| Rental vs. Sale |
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Personally, I would sign a rental agreement on the property, instead of selling. That would accomplish several things:
1. Monthly income
2. Appreciation of value (for your net worth)
3. Allows you to sell at a time of your choosing, when the market is right
That said, Coaster makes an excellent point, that you wouldn't be local to manage the property. You might consider hiring a property management firm to manage it for you; most charge between 5-10% of your monthly rent, and they'll screen tenants for you and put one in the property.
Best of luck!
Brian
Rental Lease
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Mon Nov 23, 2009 11:52 pm |
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oldguy
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Location: arizona
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You are moving South for the winter, huh? Yellowknife is waaaay up there. Did houses in Yellowknife take the same kind of drop in 2006, 2007 that we saw in the States (about 25% to 30%)?
We are expecting (or hoping for?) a boost in values over the next few years - so if the market up North acted the same way, it should be a good risk to take.
In the States rental houses are depreciated based on a 27.5 year life. That results in 'virtual' income - ie, you get to deduct the depreciation form your rental income and get a tax break but it doesn't actually cost anything.
We also have a law that allows us to waive the capital gain on a personal home, but not on a rental house. So when we have a big profit in a home, it is often better to sell it tax free rather than convert it to a rental. Of course, that hasn't been a problem lately, few people have a profit.
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Tue Nov 24, 2009 12:05 am |
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nkthen
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I always thought that it would be good to rent it out.
Afterall, if you have no loan commitment on your house, the rent is like 'residual income' for you.
Don't we all dream of residual income?
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Tue Nov 24, 2009 11:05 am |
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ykphil
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Location: Yellowknife
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Thanks to all the your advice, which confirms my initial thoughts. I know the potential renter relatively well, but not well enough to muddy any relationship if things were to get bad.
The Yellowknife real estate market has always been very tight for many reasons, one of which is the virtual lack of available lots for residential building due to high development costs, so essentially, there is a handful of decently priced houses on the market, and a high demand from a very well paid workforce that has little choice for accommodation. I bought my house for $210,000 in 1999, and 10 years later, its market value has more than doubled. Not bad in a slow economy.
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Thu Nov 26, 2009 3:51 am |
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askmr
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If I were you I am going to rent it at least there is already someone who is interested in renting it you will your monthly income
Ask Mr. Cash Flow
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Wed Dec 02, 2009 1:25 pm |
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kingion10
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Well, if you know the person who is willing to rent your house, it is a good move, but take care with the renters!
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Thu Jun 17, 2010 6:12 pm |
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