Fort Mcmurray Condo

[cmontminy]

I own a condo in Fort Mcmurray currently rented at 1800$ month with the lease ending in April 2013



Mortgage Payments are 772$ / biweekly including property taxes

Condo Fees 267$/month



So my rent basically covers my expenses but does not generate cash flow.



My tenant is offering me to purchase my condo for $335,000. He would assume my mortgage of $315,000 and give me $20,000 cash for the difference



I'm debating if I should sell or not?

Would you keep the condo and renting it and wait for it to appreciate in value?

 

[Thomas Beyer]

Why would it appreciate ? With more land coming on stream and Ft Mc prices well above Alberta's other 4 major cities there may be little upside there for a long time!

Also, rent of $1800 is too low for a condo anywhere worth over 300k.

Mortgage assumption is risky for you assuming it is insured/high ratio and not allowed unless lender approved. You may be on the hook if buyer defaults.

 

[Sherilynn]

Why would you sign a lease that doesn't cashflow? A lot of condos already rent for $2000 up there, so is your condo small or in need of updating? And for how much do similar condos sell?



Fort McMurray is a "special" place, and I think prices and rents will increase in a much shorter timespan than a decade. Sometimes it is worth hanging on for a while longer. If you aren't losing money, then why sell? However, without additional information it is difficult for anyone to give an informed opinion.

 

[cmontminy]

It is a newer 640 sq.ft. 1 bedroom condo built in 2009 in the development called Eagle Ridge . I set the rent at 1800$ after looking at comparables on kijiji in 2010 when I decided to move to Edmonton and rent the unit. I never thought about selling it until my tenant offered to buy from me. My thought is that it would be good to sell to him as I will save on the realtor fees. At $335,000 it is in mid range of price for comparable condos.

 

[Sherilynn]

When you set the rent in 2010, did you sign a 1-year lease and then renew without increasing the rent? Or did you sign a 3-year lease? This is of no use to you now, but each year when my leases renew I analyze my expenses and consider the rental market before I decide on the next year's rent.



What may help you now is to have a look at your mortgage. What are the terms and interest rate on your mortgage? And what would be the penalty to refinance? If you refinance to a longer amortization and at a lower interest rate, you may find that you could quickly save an amount equivalent to the prepayment penalty. Keep in mind that a longer amortization means less monthly payments but a higher long-term interest cost, and the property will be paid off much later, so this strategy isn't for everyone.



If refinancing, you could also add an automatically readvanceable HELOC to your mortgage
so that as you pay down the mortgage the LOC increases, giving you a
secured reserve fund and eventually enough money for another purchase.



And if you do decide to sell, why settle for the mid-range of comparable condos? Why not ask for more? Sure, you would be saving on realtor fees, but your tenant would benefit by not having to move.

 

[Thomas Beyer]

$500/ft .. Vancouver prices. I'd sell it at that price and find a house or TH in Edmonton, or 2.

 

[Sherilynn]

Not Vancouver prices...Fort Mac prices. : )

 

[Pduncan]

I would expect very little to no appreciation in the fort mcmurray condo market for the next few years. There is still a large amount of new condos being built over the next few years creating a large supply which should keep the prices from going up. My JV partner is facing this same issue at the moment.

Paul.

 

[invst4profit]

Based on the numbers you have posted, and considering you have left out numerous expenses, your condo is actually income negative. You are losing money every month you hold it as a rental property. Having next to no equity in the property and based on the posts indicating no likelihood of appreciation the condo is a lose/lose situation.



Personally I would sell asap but not to your renter as he is too high risk. He does not have enough cash to make the deal attractive and considering no bank would likely give him a mortgage you shouldn't either. Sell and be done with it before interest rates climb too high and the market drops..