To sell or hold?

[snowbird]

I have a great brick bungalow with loft! Property is in the east end of Toronto located at a bus stop that takes you to subway in 5 mins.. It is a bit unique in that it has just been completely renovated (about $170k worth of renos- I think I might have over done it!). I have converted it into 2 legal apartments, one 2 bdrm with a main floor and loft, one with 2 bdrm basement. I have seperated all utilities and legalized the basement apartment which has a seperate entrance. I am a general contractor. All finishes are high end!
Here are the numbers:
1st mortgage is $190k at 3.75% fixed for 5yrs.
$170k in renos presently on misc credit cards and plc`s.
My present mortgage broker (who I may replace in future) has offered to roll renovations into 1st mortgage at same rate 3.75%
=$360k at 3.75% +insur and property tax= $2109/ month.
I think I could sell it for $460k.
Rent; I`m not sure because of lack of new, similar houses in area, but I think I could get $1500+utilities for main floor and $900+utilities for basement.
=2400/ month.
As you can see, the numbers are close approx $300 difference.
I am a new investor and have poured everything I have into this property. I am a conservative investor.
Renovation has taken 5 months and will be complete in a month.
Should I cash in and take the $100k out and show some income for my new real estate corporation to develop credit, or take out equity and keep the property?
Thx for your time, jeff

 

[invst4profit]

If you could get a rent income of $3500 to $4000 per month it might be a keeper but is likely too high end. Tenants tend to destroy things. Unfortunately you have forgotten there are many, many more expenses to owing a rental than just the mortgage. Legal, accounting, repairs, general upkeep, evictions, vacancies, utilities when vacant, insurance etc. etc.
Expenses could run anywhere from a low of 30% of monthly income to 50-60%. Fully renovated you would be on the low side of 40% maybe for a time but it crepes with time.
You may have over renovated for the market if the expected rent is as low as you think. At $460 you may find it impossible to attract an investor at that income level. $460K warrants rents in the 4-5000/month range.

Do you want the headaches of being a LL or do you want the cash.

I would definitely sell if I could.

 

[housingrental]

I agree with Greg
List it tomorrow

 

[snowbird]

Thanks guys! This is a tough decision for me. At least their is good potential for income on it. Wonder if I`ll pay capital gains if I reinvest the money into a smarter positive cashflow property in 2009?
Thanks again, and if anyone else has any more comments, I`d appreciate them, cheers, jeff

QUOTE (housingrental @ Oct 5 2009, 10:58 AM) I agree with Greg
List it tomorrow

 

[Thomas Beyer]

QUOTE (snowbird @ Oct 4 2009, 06:47 PM) ..
I think I could sell it for $460k.
..
sell it. Two reasons:

a) cash flow is too tight, and

b) Any property worth over 300K (more or less) is too fancy to be used as a rental property. The damage tenants can do might exceed by a substantial margin the add`l proeprty value increase that may be achievable if you held 5+ years.

Use the cash to buy 2 or 3 smaller, older, uglier properties at a substantial discount, and reno them. You seem to like reno`s .. and after a few you`d realize what is "good enough". This is a very profitable business - far more profitable than buy-and-hold for the right handy guy you seem to be.

 

[snowbird]

Thanks for your input. Do you mean "reno them" to flip or rent.


QUOTE (thomasbeyer2000 @ Oct 5 2009, 10:49 AM) sell it. Two reasons:

a) cash flow is too tight, and

b) Any property worth over 300K (more or less) is too fancy to be used as a rental property. The damage tenants can do might exceed by a substantial margin the add`l proeprty value increase that may be achievable if you held 5+ years.

Use the cash to buy 2 or 3 smaller, older, uglier properties at a substantial discount, and reno them. You seem to like reno`s .. and after a few you`d realize what is "good enough". This is a very profitable business - far more profitable than buy-and-hold for the right handy guy you seem to be.

 

[GaryMcGowan]

QUOTE (snowbird @ Oct 5 2009, 06:58 PM) Thanks for your input. Do you mean "reno them" to flip or rent.

I can`t speak for Thomas,
Yes and Yes,
Reno them to flip and or Rent. This way you have more than one exit with the property. You can reno it to flip it keeping a budget in mind for a strong monthly cash flow in case you decide to keep it. Most investors here are buying for cash flow and if you can find under valued properties using your expertise you can create some very strong cash flow properties and equity if done correctly. Our last renovation took only 14k to bring it up to par with other properties. It added approx 40k of value. We purchased it at 190k. Know the market you are buying in and price your renovation accordingly to bring you the most return.

 

[Thomas Beyer]

QUOTE (snowbird @ Oct 5 2009, 03:58 PM) Thanks for your input. Do you mean "reno them" to flip or rent.
yes .. renovate .. then sell. Maybe keep a few smaller ones with great cash-flow after a re-finance with 0 cash invested ..

 

[markl]

Just thought I would comment on the sub $300k mark. If your buying in Toronto any rental will cost you more than that and if it is lower you will have to put in probably $50 - $80k to bring it up.

On another note there is always demand for properties such as this Jeff and I would stick a for sale sign up as you can get a better return some where else. The opportunity cost on the money is to high. It could be working harder for you.

 

[snowbird]

Nice comment mark. Very helpful, and i think very accurate. I appreciate you taking the time to reply, jeff

QUOTE (markl @ Oct 6 2009, 07:20 AM) Just thought I would comment on the sub $300k mark. If your buying in Toronto any rental will cost you more than that and if it is lower you will have to put in probably $50 - $80k to bring it up.

On another note there is always demand for properties such as this Jeff and I would stick a for sale sign up as you can get a better return some where else. The opportunity cost on the money is to high. It could be working harder for you.

 

[snowbird]

Thank you! Very kind of you to take the time to comment.

I am formulating my plan of attack, and this is very helpful.

I think I will slap a for sale by owner on this property soon! I am leaning away from listing with an agent, as I know some agents for advice and have experience with the agreement of Purchase and sale(and have a good real estate lawyer). IF ANYONE CARES TO COMMENT ON THIS IDEA??

I will try to attract as many people as possible, then start to take bids.

Everyones help has been appreciated..
THX, JEFF




.QUOTE (thomasbeyer2000 @ Oct 5 2009, 09:13 PM) yes .. renovate .. then sell. Maybe keep a few smaller ones with great cash-flow after a re-finance with 0 cash invested ..