To sell or to rent, that is the question.

[dshake]

I would appreciate advice regarding a home I own in Prince Rupert BC. It became vacant in July and after installing new flooring throughout and a complete paint job I intended to sell the house. It's been listed for approximately two months and I've dropped the price but haven't found a buyer. I don't like the house sitting vacant over the winter so I'm considering finding a tenant for a six month term.



Since the recent hiccup in the proposed LNG developments, I think I have several options:



1, Do nothing. Keep trying to sell.

2. Keep the house on the market and install a tenant at a lesser rent because of the hassle of living with realtor showings.

3. Let the listing lapse and keep it as a rental until the market changes for the better.



What would you do?



Also, does anyone know of a good property manager in Prince Rupert?



Thanks in advance for your advice.



Jackie

 

[Matt Crowley]

This sounds like a math question.



Try building out a pro forma for the different scenarios. Look at the final cash received based on different market expectations. Build in the cost of liquidation if you choose to sell.



As far as the tenant, I'm not intimately familiar with BC residential tenancy laws, but I suspect that shorter term periodic leases are available. In Alberta, a month to month lease would provide adequate notice for tenant to move out upon sale (with a closing date usually 60 to 90 days out). An added advantage is that shorter term leases usually command higher rent.



Then, look at the cash requirements and safety factor and make a decision based on the numbers.

 

[Sherilynn]

My last choice would be to put a tenant in the house yet keep the house on the market. Of the houses that we have sold this year, we had almost no action on them until the tenants moved.



A periodic (month to month) lease is not a good idea (at least in Alberta) because selling the property is not an acceptable reason to end the lease. As previously mentioned, it depends on local tenancy laws, but in Alberta if you must rent the property before sale, then a fixed-term lease is your best option because you can have a set time-frame for the lease and have absolutely no obligation to renew. "Lease is over...get out." (Too blunt?)



Depending on the price range of your property and the state of the local market, 2 months is not an unreasonable time to be on the market. Our higher-end properties took 2 months to sell in the summer months, and fall is usually slower. Consult with your realtor, but you may want to try waiting a bit longer.



Another option is to consider offering seller-financing or lease-options. With seller-financing, the buyer may buy the property without qualifying for a bank mortgage - this is for people with around 20% down. And lease-options appeal to 'buyers' who only have a small initial payment (such as 5%) and can't quite make it past the mortgage insurance companies' strict standards.



Both of these are advanced strategies, so please consult with a local expert familiar with these strategies.

 

[Thomas Beyer]

Some numbers re rent levels and house value are required.



Did you consider a rent-to-own ?



Did you talk to some other realtors re price levels / area / house features ?



Are there any negatives here, maybe the paint job is real bad, the layout weird, only one bathroom, or the view terrible or the smell from the garbage dumpy nearby ?



Usually if the house doesn't sell it is overpriced or has a negative attribute.



Did you try staging it ?



Why did you buy in PR btw ?

 

[Matt Crowley]

[quote user=Sherilynn]A periodic (month to month) lease is not a good idea (at least in Alberta)




From the Service Alberta website (Source: http://www.servicealberta.gov.ab.ca/618.cfm). Note that I do not intimately know the residential tenancy laws in BC.




When can a landlord end a periodic tenancy?




The only reasons landlords can terminate periodic tenancies for are:

• 
  - the landlord or a relative of the landlord intends to occupy the premises,
  
  - the landlord has entered into an agreement to sell the premises and all the conditions of the sale have been satisfied or waived, or the agreement is to sell one detached or semi-detached dwelling unit and/or condominium unit, and the purchaser requests in writing that the landlord give the tenant a notice to terminate the tenancy,
  
  
  

The expectation of the Alberta real estate sales contract (AREA) is also for a vacant possession unless stated otherwise.

 

[dshake]

Thanks to everyone for your advice. I think I'll wait until the listing expires, but will consider putting in a tenant for a six month lease afterwards because I believe that spring will be a much better time to sell, particularly in Prince Rupert. The house will cash flow beautifully in the meantime. (It's our former family home and holds a special place in my heart but I'm ready to let it go.)



Jackie

 

[Sherilynn]

[quote user=SweetZone][quote user=Sherilynn]A periodic (month to month) lease is not a good idea (at least in Alberta)




From the Service Alberta website (Source: http://www.servicealberta.gov.ab.ca/618.cfm). Note that I do not intimately know the residential tenancy laws in BC.




When can a landlord end a periodic tenancy?




The only reasons landlords can terminate periodic tenancies for are:

• 
  - the landlord or a relative of the landlord intends to occupy the premises,
  
  - the landlord has entered into an agreement to sell the premises and all the conditions of the sale have been satisfied or waived, or the agreement is to sell one detached or semi-detached dwelling unit and/or condominium unit, and the purchaser requests in writing that the landlord give the tenant a notice to terminate the tenancy,
  
  
  

The expectation of the Alberta real estate sales contract (AREA) is also for a vacant possession unless stated otherwise.





Interesting.



The RTA Handbook on Terminating a Tenancy states:



"It the tenant has not committed a substantial breach, a landlord can only end a periodic tenancy for the following reasons:...The landlord has sold the residential premises and the purchaser or a relative of the purchaser wants to move in...."



So while the AREA contract states that vacant possession is expected, it has always been my understanding that a landlord cannot guarantee vacant possession because a tenant cannot be ordered to leave simply because the property is for sale. I believe that is why so many listings in Alberta state "tenants' rights apply" so as to inform buyers that vacant possession will not be provided.



A fixed-term lease avoids this issue.