Property Management

[KimReedSmith]

I will be attending ACRE this weekend and one thing I would really like to focus on would be to identify/

find a property management group for my current place when we potentially move.



Currently our mortgage+condo fees+property tax = $1522/month.



There are 2 other units in my complex that have been rented out at $1450.



Unless I can get $1525-$1550/month I will be looking at a negative

cash flow property! At the same time I would be losing a fair amount

of money if we were to sell anytime soon.

I know based on Don's system you wouldn't invest in a negative cash

flow property - but what about in my situation where the property was

purchased as principal residence, then because of the situation

wanted to have it as a rental unit?



Also with regards to property management (which I didn't factor into

the above numbers). I met with my real estate agent that I worked with

when I purchased my place and they aware that we are looking to move

and we discussed selling/renting options. They offered to us that they

would look after our property (as a property manager-even though they

aren't) for free. They have their own investment properties in Calgary and would

just use who they use if anything needed to be done (plumber for example).



What are your thoughts on this? What's behind the curtains? I'm assuming they are

offering this because they want to be the agent we use when time comes to

sell?



Thanks.

 

[Rickson9]

Sell the unit.

 

[Thomas Beyer]

What's fair market value if you sold ? The negative cash flow is small, and easily offset by principal pay down.

 

[kir]

[quote user=KimReedSmith84]

...

Also with regards to property management (which I didn't factor into

the above numbers). I met with my real estate agent that I worked with

when I purchased my place and they aware that we are looking to move

and we discussed selling/renting options. They offered to us that they

would look after our property (as a property manager-even though they

aren't) for free. They have their own investment properties in Calgary and would

just use who they use if anything needed to be done (plumber for example).








Realtor's doing PM for free? and they sold you a condo at the time. Isn't this inducement of some kind?

 

[KimReedSmith]

This was in an initial meeting with our realtor and we didn't get into all the details. They just made it sound like they could look after the property for us if we decided to move and rent it out.

 

[housingrental]

I second this post

[quote user=Rickson9]Sell the unit.

 

[kir]

Incentives and inducement should be endorsed by the broker.

http://www.reca.ca/industry/content/legislation-bulletins/information-bulletins/inducements.html





Kir,

 

[tsb]

How much equity has built up in the property? Is there enough to buy something interesting after the cost of selling and re investing? Something more profitable or with a positive cashflow?



Sean

 

[KimReedSmith]

Thanks Thomas,



We purchased our townhouse in November 2008 for $315 000.



There has been only one unit that has sold in the complex in last 6 months.



There are 2 other units on the market right now that are listed from at $309 900 and $319 900.

 

[RedlineBrett]

[quote user=kir]

Incentives and inducement should be endorsed by the broker.

http://www.reca.ca/industry/content/legislation-bulletins/information-bulletins/inducements.html





Kir,







I dont think this is an incentive/inducement though, unless there is actual language surrounding the premise that the realtor will get the listing when the poster wants to sell. What if the realtor opens the car door for you or holds your hand crossing the street?



The bigger issue is that the brokerage has to actually *do* property management for the agent to be able to offer this service to a client. Most of the franchises do not.

 

[kfort]

If you had a $5,000 penalty to sell now, it would take roughly 50 months to lose that if you held it (at your numbers provided).



Over those 50 months you will pay down principle, (gain equity).

It also will either appreciate, stay flat, or lose value (and you should know fairly well which will happen!).

Factor in the PITA that it will cause you during this timeframe.



After all this has been considered you should have your answer.



Ex:

$100,000.00 sale costs you $5,000 to mortgage holder



hold it for 36 months @ $200/month principle paydown and you have $7,200 equity buildup.



Sell for same 100k, you still maybe owe $5,000 for breaking term early but you now have an extra $7,200 in your pocket to pay that with... Factor in how much of a pain this property will be, how much you hate "bleeding" $100/ month into it, etc etc and decide if you hold. You don't necessarily need to sell a negative cashflow property the day it becomes negative... Sometimes it loses less money if you hold for a year or two... sometimes NOT!



Numbers are example only, use your accurate numbers and assess.