What should I do with my condo

[goldenboy]

All right, so here is my situation. I am currently employed full time, I make very decent money and I'm single. Over 100k/year. At the moment I work in Lac La Biche, Ab and rent a condo here and I also own a condo that I had purchased 4 years back in Grande-prairie for $180 000. I only go back to Grande-Prairie once a month or once every couple months for a week. So basically I'm not using the place.



At the moment I still owe roughly $165000 on my mortgage which is due to be renewed in June 2014. Unfortunately the place could probably only sell for between $130000 and $140000 which would mean that I would lose in the worse case scenario $35000.



I don't have to sell the place, I'm not tight financially by any means but I just feel that it's money going out the window since I don't live there and only spend a week every now and then there.



I was wondering what should I do with the place, I have really 3 options at the moment:

1. Hold on to it and keep paying my mortgage until real estate picks back up in Grande-Prairie.

2. Rent the place through a property management company (they cost roughly $200/month) and the place could rent for about $1000-$1200 a month. My mortgage is $835/monthly and the condo fees are $235/monthly.

3. Sell the place and lose money but be done with it, and technically not have to pay $1070/monthly + $200 in bills.



Some of my concerns are that if I hold on to the place, the condo fees seem to keep going up every year and I will eventually just lose money regardless of what happens with the real estate market in Grande-Prairie. If I rent it, the place is going to get thrashed by renters and I'll have to spend a bunch of money fixing it.



Also another question is, what should I do when comes time to re-mortgage. Take an open mortgage? Lock it in for 5 more years at a lower interest rate than what I have now if possible (Got 3.75% back then which wasn't bad).



Thanks in advance.

 

[Rickson9]

Speaking for myself, I would get an open mortgage and sell the place.

But that's me. Generally real estate turns slowly.

 

[kfort]

May not be a bad time to get an informed opinion on the condo corp's condition. Grab the Estopel and AGM minutes etc send it to get a qualified legal opinion before you either pull the plug on a winner or wrap your arms around a sinking ship..

 

[goldenboy]

I think I'm going to rent it. I talked to 3 property management companies that have 100% success rate renting. I could probably even make a profit renting the place.

 

[kfort]

Pay close attention to their contract. Look for hidden fees such as $50/ smoke alarm check etc.. get referrences. Start with a medium/short leash... loosen it in time.

 

[Thomas Beyer]

sound strategy, albeit slightly negative due to property taxes, R&M, management fee and upgrades (a carpet every so often, a new fridge here and there, or a condo corp cash call)



Rent, renew mortgage next year for 5 years, then review strategy every 5 years. I own two such condos since the late 90's and early 2000's (and a few buildings).



Best way to build your wealth: one condo (or later, building) at the time with as little time invested as possible. Check on the place once in a while, perhaps join the condo board if you wish to get more involved or learn, but that depends on the goals you have for your overall real estate holdings.



If it works, why not buy another condo for $130,000 in that same building .. or 3 ?

 

[goldenboy]

Completely agree here. I was looking at all the solutions very closely and figured that I can rent the place through a property management company for roughly $1300/monthly which would cover the cost of my mortgage, condo fees and the property management fees. I may not make a profit but at least I won't be losing $40000 selling it at a loss.



I phoned around today and talked to a few property management companies in Grande-Prairie and they say that they have big pools of renters. It's almost headache free besides like you say sometimes you may need to replace a fridge or carpet, etc. But that's nothing compared to a $40000 loss.



Thank you!

 

[Thomas Beyer]

Why not buy 4 more for $35,000 cash per (plus mortgage) ?



In 20 years (likely earlier) you have $1M in equity with $6000 - 7000 free cash-flow a month ! Try this in the stock market !



Paying $130,000 for $1300/month rent is a rare find these days !

 

[Rickson9]

Some people just need to touch the stove to believe that it burns. Have fun losing money.



[quote user=ThomasBeyer]Why not buy 4 more for $35,000 cash per (plus mortgage) ?



In 20 years (likely earlier) you have $1M in equity with $6000 - 7000 free cash-flow a month ! Try this in the stock market !




Is that 2 decade result supposed to be impressive? I'm no pro but I've been able to do better than that and there are investors who are far (far) better than I am at investing in the stock market.



Actually looking more closely at those numbers, I'm probably going to do that in Phoenix.



NB: The only reason an individual compares stocks and real estate and determines one to be superior is because they don't understand one or the other. I usually understand that the individual is a newbie in the asset class that they feel is 'inferior'.



From the few stock market comments I've read on the public forums here, it's safe to say that 99% have no idea how to make money in the stock market. And I'm being conservative.

 

[goldenboy]

I don't believe I will be losing money, If I was to sell the place, I would be losing $40000 right now. What could possibly justify such a loss? The biggest thing is that my building still has brand new units for sale, hence why the resell price is so low at the moment. Once the complex is full, the price will likely go back up.



I'm not sure exactly why your strategy would be to sell the place Rickson9. You have to remember Grande-Prairie is still a booming town and also a place where rent is extremely high. Technically speaking, a perfect place for rental properties since there is always some sort of a housing crisis going on.

 

[Thomas Beyer]

What kind of condo is this for $130,000 ? A two BR ?

Is this a quality building with no deficiencies ? Decent location ? Unit size ? Is there a link online ?

Wy not buy two more ?

 

[goldenboy]

There are 2 buildings, and they were built 4 years ago. It also has nice features, underground parking lot, gym and a "get together room" that you can rent out. The condo I have is 709sq-ft, 1 bedroom. Perfect size for a couple. With washer / dryer / dish washer.



Here is a link where you can find all of the information you need and floor plans, etc.:

http://www.auroraestates.net/

 

[RealtorDave]

Why do you need a property management company? It sounds like you go back there enough. If you get good tenants, you'll barely hear from them. Also, its a condo, so many issues that could arise are the responsibility of the corporation. I wouldn't spend 2500 bucks for no reason.

 

[Thomas Beyer]

[quote user=RealtorDave]Why do you need a property management company?
Placing ads, screen tenants, collect rent, evict if necessary using proper legal procedures, pay bills

 

[sgbill]

You can get some Idea about the importance of property management company from this page

http://en.wikipedia.org/wiki/Property_management



Or if you need more information, you can take advise from this realtor (Richmond Hill Real Estate Agent), i have used his services several times and he is best in his area.

 

[invst4profit]

I would tend to agree with Rickson9 in this case.



The $40,000 has already been lost and unfortunately the chances of regaining a significant portion of that in a realistic period of time is not likely to happen. The best you can hope for is having a tenant pay down the principal over time to get you to a break even point.

Historically condos as rentals have not seen good positive cash flow investment and in this case based on mortgage interest (which will rise), condo fees (which will rising), management, taxes, insurance, vacancy costs, maintenance etc. you will experience negative cash flow monthly over the hold period.



In the end, all things considered, you will most likely discover holding will be a frustrating exercise which will not achieve the goals you desire. I would bite the bullet and take the loss now rather than later.



As far as hiring a management company is concerned for a single property this is the approach of lazy investors. You are seeking a easy fix to a bad financial situation and in this case spending more money to make money is not the answer. It is simply money spent to avoid the occasional dirty work of being a income property investor. I view this approach to the business as arm chair investors expecting great returns for no effort. This is not practical and in my opinion a waste of money on a single condo.



Figuring out when to hold and when to fold is fairly simple when the best possible upside you are "gambling" on is only a smaller loss.

 

[Thomas Beyer]

[quote user=invst4profit]The $40,000 has already been lost and unfortunately the chances of regaining a significant portion of that in a realistic period of time is not likely to happen.


GP's prices dropped hard from 2007-2010. Thus significant upside is to be expected, to Edmonton price levels.



[quote user=invst4profit]

In the end, all things considered, you will most likely discover holding will be a frustrating exercise which will not achieve the goals you desire. I would bite the bullet and take the loss now rather than later.
That makes no sense.



Cash-flow will be decent if indeed $1250/month is obtainable for a $130,000 condo. The LNG boom is here to stay, as companies and government switch to gas from oil. Gas is now green, and solar / wind cannot deliver the promised land of a cool earth and independence from evil oil. Even Obama has embraced it. Gas is not a fossil fuel anymore, it is now green ! Burn baby, burn !



Thus, owning a cash-flowing piece of real estate in GP makes total sense to me !

 

[RealtorDave]

[quote user=invst4profit]I would tend to agree with Rickson9 in this case.



As far as hiring a management company is concerned for a single property this is the approach of lazy investors. You are seeking a easy fix to a bad financial situation and in this case spending more money to make money is not the answer. It is simply money spent to avoid the occasional dirty work of being a income property investor. I view this approach to the business as arm chair investors expecting great returns for no effort. This is not practical and in my opinion a waste of money on a single condo.







Yep.

 

[goldenboy]

First of all, I never mentioned that needed to turn my condo in a profitable rental property. I was simply exploring the solutions ahead of me for what to do with my property. I'm not going to go back there anymore if I do end up renting my condo which is one of the biggest reasons why I do need a property management company to take care of things. I can't just leave work, drive 5 hours to go take care of minor problems in my condo if there ever were to be. That's just nonsensical.

Also who ever mentioned that I should sell my property at a loss, you guys obviously don't understand what my situation is. I don't need to sell the condo, I'm not strapped for cash and I can sit on it for as long as it takes to come back up. Renting it is definitely the smart thing to do in this case since they will basically be taking care of the mortgage payment and the condo fees until it does go back up and I'm able to sell it for the right price if I ever do sell it.

Let's not forget that Grande-Prairie's economical sector is still booming although the housing market has lost some of its value. It still serves a lot of neighboring communities. The city is home for a lot of drilling / completion / exploration service companies. Definitely a strategic place to own a rental property in my opinion. Employment rate is close to 80%.

Don't comment in this thread if you have nothing to say or you're just trying to be negative. You don't lose money on a property until you sell it.

 

[Rickson9]

Some people just need to touch the stove to believe that it burns. That's really all there is to it.