Should I sell? Need Advice Quick

[Millions]

Hey everyone,

I bought a condo 2 years ago for 258K. I put $15,000 down (which went mostly to cmhc fees) and have it rented it out at a negative cash flow of $400/mth.

Current value according to city assessment is $240K and the mortgage left on it is 240K.

Options:

a) Let someone assume it but my only offers are for $6000 to assume with qualifying

b) Keep it and keep paying the $400/mth and hope the market recovers soon.

What does everyone think? any advice? what would you do?

I hate to give it up for $6000 when I have put close to $25-28K into it but what is best?

Thanks

Matt

 

[Thomas Beyer]

QUOTE (Millions @ Feb 5 2009, 09:55 AM) Hey... at a negative cash flow of $400/mth.

Matt:

where is it ? how big ? brand new ? old ? what is happening in the immediate area ? woodframe ? concrete ?

How long can you afford a negative $400/month ? That is $5000/year ! $25,000 in 5 years .. will it be worth $280,000 in 5 years .. and then you are just break even .. so it MUST MUST be worth at least 300K in 5 years to compensate for add`l 25K invested and add`l carrying risk.

btw: if someone assume a CMHC mortgage, and they default YOU are on the hook !! Did you know that ? Perhaps an add`l personal guarantee and/or indemnity agreement in addition to assumption is in order !

 

[invst4profit]

I do not know about city assessments out your way but around here they do not accuratly reflect market value of a home.
Are you aware of the present comps in your market area.

 

[Millions]

QUOTE (thomasbeyer2000 @ Feb 5 2009, 10:02 AM) Matt:

where is it ? how big ? brand new ? old ? what is happening in the immediate area ? woodframe ? concrete ?

How long can you afford a negative $400/month ? That is $5000/year ! $25,000 in 5 years .. will it be worth $280,000 in 5 years .. and then you are just break even .. so it MUST MUST be worth at least 300K in 5 years to compensate for add`l 25K invested and add`l carrying risk.

btw: if someone assume a CMHC mortgage, and they default YOU are on the hook !! Did you know that ? Perhaps an add`l personal guarantee and/or indemnity agreement in addition to assumption is in order !


Hey thanks for the reply. It is in Killarney. 1915 26 street sw. Top floor (3rd) about 1981 it was built. I believe it is concrete but id have to check. In the area, is alot of infills with new houses but im not sure how it is during this downturn.

I suppose i can afford for a year or more but is it worth it is right.

Yes I heard your on the hook for 1 year, I suppose if I get him to sign something, it would be okay?

Thanks

Matt

 

[Millions]

QUOTE (invst4profit @ Feb 5 2009, 12:55 PM) I do not know about city assessments out your way but around here they do not accuratly reflect market value of a home.
Are you aware of the present comps in your market area.


Hey, Well I have checked around and not much seems to make it over 240K. In that building, the last 2 sales were in september or so at $210K and the one before that in June or august at 258K.

Matt

 

[Dan_Eisenhauer]

Deduct another expense from Thomas` figure... real estate commissions.

This some down to a personal choice. Would you rather subsidize a rental rate for 3 - 5 years, hopefully decreasing each year, before you break even? Or would you rather take the hit now and lose most, if not all, of your invested equity?

Remember that in both cases you get tax benefits... in the first case a direct tax write off that can offset other sources of income. In the latter case it is a capital loss, where you can use only 50% of the loss as a write off.

 

[GarthChapman]

Some ideas:

Could you reduce your mortgage payments, by
1) extending the amortization or
2) reducing payments based on prime lowering if a VRM or
3) by refinancing (with the same Lender or another) to a lower interest rate or a longer amortization?

You can skip a mortgage payment once a year with most Lenders.

Could you increase your revenues and climb out with a sale on a rent-to-own, or an Agreement For Sale?


btw- you are responsible to CMHC if the Buyer defaults for the entire term of the mortgage, even if it is sold and the mortgage assumed several times over. You can write to ask them after a year if the Buyer has made all payments on time, but nothing requires CMHC to let you off the hook. They may do so, and they have in the past but it is not policy. If your sale is to a related party they will almost surely not.