What do to with this property? Rent to own? Short term rental?

[t3ch]

Happy holidays everyone. My partner and I are currently shopping for a new home to move into and I am looking at what to do with the house we currently live in, I don't think long term hold make sense for this property so it's between selling it and short/medium term rental. The house is located in Calgary, AB in Legacy. Single attached garage roughly 1700sq. The house was purchased 6 years ago for $415 000 with 5% down. The options I am currently considering are:

- Tenant renting:
The house would not cashflow, rents aren't high enough to cover all expenses as a 1 unit rental and basement suite doesn't seem to be a viable option due to the cost of separate entrance and layout of the house.

- Short term rental:
Listing the house on Airbnb and other short term rentals sites or executive rental. This could provide enough cash flow go cover all expenses and hopefully be cash flow positive, it would also provide me exposure to short term rentals. I'm not sure the location would be ideal, it's closed to spruce Meadows in the summer but that's about it and limited transit.

- Rent to own:
This currently seems to be my best option so far, it seems like it would allow me enough income to be cash flow positive while selling the house with less fees? (Aka realtor). This would also give me exposure with something I have been wanting to learn more about.

- Selling it:
I would likely get around $420-430 000 minus fees (realtor, lawyer etc). Any left over equity would go toward acquiring another rental property.


What are your thoughts?

Anthony

 

[Martin1968]

You have 2 more options,

5) room rental (labour intensive in terms of managing but could make it cash flow)
6) IMO the best option.........stay put for another 5 years.

From your own options, I would try nr 4 first. Who knows maybe you succeed selling it.

Cheers! All the best for 2020

 

[Thomas Beyer]

Try rent to own. It has risks too if tenant doesn’t pay enough up front and then defaults on payments or can’t buy. RTO works well with well qualified tenants though.

Why do you have to sell? Huge switching costs! Tens of thousands of $s. Is it worth it ?


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[t3ch]

Thanks guys, selling is my last option for reasons above, especially the property was purchased with 5% down so little of my cash is tied into it. Renting by the room would still not cash flow as it is a 3 bedrooms I would have to charge an insane amount to make it work.

Anthony

 

[Michel Lafleur]

There are a number of creative investors who thrive on AFS deals. Could you sell by way of Agreement For Sale (AFS), and have the buyer pay out your current equity in exchange for several years of vendor financing?

 

[Thomas Beyer]

Sometimes you have to eat a loss, acknowledge you made a mistake and move on without excessive self-flagellating !!


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[Martin1968]

Is it a mistake though if the market didn’t work in your favour? Seems to me that a house bought for 415K 6 years ago and would fetch 420-430K minus expenses in the current market is a very minimal loss that wouldn’t be to hard to absorb IMO.

I would suspect tho, looking at current Calgary and area market, houses bought 6 years ago in that price range sell for 30 to 50K less in today’s (Buyers’) market. If you can sell at a higher price then what you purchased for you have done phenomenal.

 

[Thomas Beyer]

Is it a mistake though if the market didn’t work in your favour? Seems to me that a house bought for 415K 6 years ago and would fetch 420-430K minus expenses in the current market is a very minimal loss that wouldn’t be to hard to absorb IMO.

I would suspect tho, looking at current Calgary and area market, houses bought 6 years ago in that price range sell for 30 to 50K less in today’s (Buyers’) market. If you can sell at a higher price then what you purchased for you have done phenomenal.

Mistakes or decisions taken in the past are usually only visible later, in hindsight. Sometimes it’s the market, sometimes the actual property, sometimes just the price, sometimes your specific actions like lender chosen, tenant poorly selected, upgrades poorly done or weak marketing.

Regardless, assess facts NOW, and decide what is best NOW, without major self pity or beating yourself up. Move on. That may involve taking a minor or major loss. It may hurt. It may be painful. Assess cost and opportunity. Then decide. Only in a year or a decade will you know if the decision taken now was the right one, or a mistake, too.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com

 

[t3ch]

Thanks for the replies.
It's not about acknowledging a mistake. This house good for us 6 years ago. I have no issue taking a loss (although I wouldn't be taking any) my post was about the best use for the property, which I already own. I have done calculations since and selling to redeploy the capital in a a better property is a good option but rent to own seems like the best use of the property.

Anthony