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View Full Version : downtown condo, rent or sell? advise needed



is300izo
08-29-2006, 08:49 AM
hey guys i am looking for some advise, i have a brand new condo that i am looking to either sell or rent out ( you may have seen my posting in marketplace) and i am not sure what i should do, rent or sell? I have a renter who is willing to pay me approx $1700/month for 6 months and pay me up front and i am not sure if i should take it or sell the place before the market goes down. i just dont want to be in the position where I rent it now and then loose $$$ if the market goes down when I go to sell in 6 months when the lease is up. I know that this is the nature of busness that that you have to take risks but I was wondering what your opinion is?

SiG Baby
08-29-2006, 10:15 AM
^^IMO the market will NOT go down. There are so many people flocking to our city for jobs, and we have a demand for commercial real estate second only in the world to Tokyo Japan. Pretty much hold onto your place for as long as you can. And rental income is a sure thing right now, just make sure this guy is ligit. I have heard many horor stories about bad renters.

sputnik
08-29-2006, 10:46 AM
Originally posted by SiG Baby
^^IMO the market will NOT go down. There are so many people flocking to our city for jobs, and we have a demand for commercial real estate second only in the world to Tokyo Japan. Pretty much hold onto your place for as long as you can.

Probably the worst advice possible.

What if people stop flocking to Calgary?
What if oil drops to under $50/barrel?
What if the labour shortage impacts the oil industry?
What if interest rates increase?

There are no guarantees in real estate. It can drop just as fast as it goes up. I treat real estate like buying stocks. If I make money... I sell. Nobody ever lost money selling to early.

When considering renting. If $1700/month is what it will take to break even, I would consider sell based on whether or not rents will be able to maintain that level. With the number of new condo buildings nearing completion there is the possibility that many more rental units will be coming up on the market.

richardchan2002
08-29-2006, 10:49 AM
I don't think anyone knows what's going to happen to the housing market. It could go either way.

For myself, I've noticed the market slowing down and house prices dropping in the past few months. I've gone to look at houses where builders told me they dropped prices significantly on brand new houses because it's been so slow. Plus I have access (through a realtor that I work with) to the numbers of active listings in town and they've gone up almost 10-fold since the peak of the market a few months back. The time to cash in was a few months ago - now with all these houses on the marketplace, houses are taking months to sell and sellers are no longer getting above their asking price.

With all these new condos being built and people trying to flip them, I could see it saturating the market and driving prices down. It's still anyone's best guess though. Historical data actually shows that house prices actually went down after the boom in the early 1980's so it's not like it's impossible for real estate to come down in value.

Anyway, for myself I'm not in a huge hurry to buy a place so I'm going to wait.



*edit*
I'm on the same page as sputnik. Well said. ^

max_boost
08-29-2006, 10:51 AM
Well I don't think the market is going to go down in 6 months. This fear mongering is a bit ridiculous but I'll eat my words if it does crash. haha :nut:

Well I also assume you've already made good $$$ on the condo? Why not sell it, pocket the cash and look for other places to invest? Could you make more money if you invested the money elsewhere?

gkAeris
08-29-2006, 10:59 AM
since you having problems selling the condo still,

why just rent it out for the 6 months term, and still leave it on the market with possesion in 6 months or take over tenants?

that way you get the best of both worlds....
again it depends what your monthly payments are...

i guess that would be what i would do.

black_2.5RS
08-29-2006, 11:03 AM
Keep the condo and rent it out. Real estate holds value very well and the paper today said to expect our population to hit 1.25million in X years which will put more pressure on renters trying to find a place to live.

I think that property will stay hot (perhaps not as hot as it is now) but that only means your property will be increasing at a slightly slower rate. You don't really lose any money since someone is essentially paying your mortgage (or at least subsidizing a portion of it for 6 months).

Just my 0.02.

max_boost
08-29-2006, 11:08 AM
I'm no expert myself but does a brand new place carry higher value than one that has been lived in? :dunno:

I agree that prices are levelling off a bit but as long as you have owned the property prior to the spike, you still stand to make a lot of cash. Let's not get too greedy here if it was an investment to begin with. ;)

googe
08-29-2006, 11:27 AM
Originally posted by sputnik


Probably the worst advice possible.

What if people stop flocking to Calgary?
What if oil drops to under $50/barrel?
What if the labour shortage impacts the oil industry?
What if interest rates increase?

There are no guarantees in real estate. It can drop just as fast as it goes up. I treat real estate like buying stocks. If I make money... I sell. Nobody ever lost money selling to early.

When considering renting. If $1700/month is what it will take to break even, I would consider sell based on whether or not rents will be able to maintain that level. With the number of new condo buildings nearing completion there is the possibility that many more rental units will be coming up on the market.

Probably the worst advice possible. ;)

is300izo
08-29-2006, 11:30 AM
Thanks for all of your opinions guys. Well if I rent the place out for $1700 /month, I will be generating a posotive cash flow wich is very important to me. I know that there are alot of condo developments in Calgary right now but to be honest I dont think that there are any that are going to be completed until 2008, wich means that I wont have alot of competition next year if I do choose to sell then.( that being said if anyone else knows of other projects that are going to be complete before 2008 then please let me know).

I have decided to rent it out for 6 months since I believe that the market tends to get hotter in spring and due to the fact that there really shouldnt be too much competition next year for selling with other brand new condo towers. Furthermore the renter is paying me 6 months in advance so I really cant pass this up.

Yes real estate is like stocks so I could be taking a loss but right now I am willing to take the risk, hopefully it pays off.

HRD2PLZ
08-29-2006, 11:32 AM
I'll post basically what I said in PM for the benefit of others. Keep it and rent it out in a short term lease for now, if you still want to sell it, list in the spring when the market is picking up again. With so much on the market now prices are most definitely levelling out, and in a lot of cases prices are being reduced in order to get properties sold.

googe
08-29-2006, 11:42 AM
FYI June - August is the slowest time for real estate, every year. It usually starts to pick up around September and then dies again in December. Next spike after that is January. 6 months will be a much better sellers market.

HRD2PLZ
08-29-2006, 03:23 PM
June and part of July this year weren't bad at all, but that was probably due to our fast paced Spring market. August has slown down substaintially though. But yes, typically June - August is slower. Market completely dies off in December and makes a slow creep towards normal in January/February.

Auditor
08-29-2006, 04:46 PM
My personal thoughts are that the market has slowed b/c a lot of people are listing what they have in fear the market is slowing down.

I don't think the market in Alberta is going to fall anytime soon, slowdown..yeah, fall-no.

Anybody that thinks 30% increases year over year is reasonable must be smoking crack.

Weapon_R
08-29-2006, 05:07 PM
My theory is that you want to try and keep newer properties and rent them out over the long run so that you can have them paid off in a reasonable period of time because they will continue to generate income and they'll still be desirable in a couple decades.

Older properties will be less desirable 20 years from now so those are the ones you want to flip and sell. The market is hardly 'crashing', with the amount of people that will continue to move into Alberta we will always need housing.

I say keep it - there will ALWAYS be renters, in the good times and the bad times. And in 10-20 years when its paid off, that condo will always give you a very generous payoff each month.

khtm
08-29-2006, 05:19 PM
Regardless if real estate prices drop or not, the DOWNTOWN area will be the last place affected. I think you'd definitely be safe to rent it out.

evilution
08-30-2006, 09:37 AM
the market slows because moving is also a bitch in the summer. People moving from other cities (and even countries) dont want to come during the snow-filled months.

Also, don't base the jump in housing prices to the oil prices. I think the oil prices helped sparked the hype, but then the false supply and demand pushed housing prices to astronomical heights.

Consider Texas, USA's oil capital. Their average housing prices only increased a modest 3-4 %. If any of you follow the RE market, you must've heard about the bubble burst in the USA. The same WILL occur in Calgary. The housing prices are just much too high for our circumstances. I think people are just so unrealistic because calgary's price drop has not occured in a while. (about 10-15 years).

Don't get me wrong, I still believe it is still a seller's market, and you should hold on to your place until spring, because i believe you can still find a seller then. Just don't hold on to it for 3-4 years because you cannot predict that far. (You cannot predict the media, interest rates). Don't get greedy. Cash out next spring, or the one after, and invest into something more stable.

But if you're making positive cash flow, why not hold on to it for a long time, and lock in a tenant for a long period. many tenants are willing to pay top dollar for a nice location, and worry-free of not moving.

googe
08-30-2006, 12:16 PM
youre best off reading some analyses by economists and such. no one on beyond ever has any idea what theyre talking about. well, the odd one does, but its hard to filter out all the fud and baseless speculation by completely unqualified laymen that just like to get on their soapbox. these threads come up all the time and its always the same misinformation. if the market does go down, its not going to be for the reasons mentioned.

really though, the market has never gone down, ever. if you take a specific time frame and see that there was a drop then widen that time frame and the end will always be higher than the beginning. since everyone likes to use the 80s as an example, look at how low it temporarily dropped, and then look where it went afterwards. anyone that held on to their properties throughout that time is laughing all the way to the bank now.

sputnik
08-30-2006, 12:48 PM
Originally posted by googe
youre best off reading some analyses by economists and such. no one on beyond ever has any idea what theyre talking about. well, the odd one does, but its hard to filter out all the fud and baseless speculation by completely unqualified laymen that just like to get on their soapbox. these threads come up all the time and its always the same misinformation. if the market does go down, its not going to be for the reasons mentioned.

So you tell people not to listen to people posting on Beyond because they have no idea as to what they are talking about and then proceed to give your own advice.

:rolleyes: :rolleyes:


Originally posted by googe
really though, the market has never gone down, ever. if you take a specific time frame and see that there was a drop then widen that time frame and the end will always be higher than the beginning. since everyone likes to use the 80s as an example, look at how low it temporarily dropped, and then look where it went afterwards. anyone that held on to their properties throughout that time is laughing all the way to the bank now.

To say that the market "has never gone down", is false. Even if it hadnt gone down in Calgary (which it has) you should have said "hasnt gone down YET".

Also, define "temporarily". My friend bought a condo in 1979 and had to wait until 1985 before he was able to sell it for what he paid for it. That doesnt include inflation either. So if you plan on living in the same place for 10 years, sure... you can come out ahead in most cases. However people's lives dont move that slowly, very often people buy places to live in on their own and then they get married have kids and need a bigger place. Not everyone has 10 years to wait out a slump. In addition to this, what if the slump causes massive unemployment and you lose your job or have to work getting paid much less than you were before and cant afford to make your payments?

Its nice to look at Calgary through rose coloured glasses but nowhere is perfect and anything can happen.

googe
08-30-2006, 12:56 PM
Originally posted by sputnik


So you tell people not to listen to people posting on Beyond because they have no idea as to what they are talking about and then proceed to give your own advice.

:rolleyes: :rolleyes:



if you read, I didnt give my advice, I said to look to qualified forecasts and analyses for it. seems you and I run into this frequently when this topic comes up ;) do you see anywhere in there where I said he should buy/sell/hold? no, I said youre best off taking advice from someone qualified and then make your own informed decision. and if you say something like "advising him to get advice from someone qualified that can back up their claims is still giving advice", well, then youre being silly.


Originally posted by sputnik


Also, define "temporarily". My friend bought a condo in 1979 and had to wait until 1985 before he was able to sell it for what he paid for it. That doesnt include inflation either. So if you plan on living in the same place for 10 years, sure... you can come out ahead in most cases. However people's lives dont move that slowly, very often people buy places to live in on their own and then they get married have kids and need a bigger place. Not everyone has 10 years to wait out a slump. In addition to this, what if the slump causes massive unemployment and you lose your job or have to work getting paid much less than you were before and cant afford to make your payments?


oops, recheck that math - 1985 minus 1979 = 6 years, not 10!

6 = "temporarily" btw

temporarily
adv : for a limited time only; not permanently; "he will work here
temporarily"; "he was brought out of retirement
temporarily"; "a power failure temporarily darkened the
town" [ant: permanently]

and "hasnt gone down" and "hasnt gone down YET" are the same thing in english. the "YET" is redundant. also your arguments about moving to a bigger place or where you plan on living are irrelevant, this is about investments in rental properties. unless youre telling him to sell his primary residence in case he needs a bigger place sometime, which i think we can both agree doesnt make any sense at all. either way thats not what the question was about.

you can "what if" until the earth is shattered by a meteor. man, that would be bad for real estate. im so not buying anything.

max_boost
08-30-2006, 01:59 PM
:rofl: :rofl: :rofl: at the bickering. I enjoy reading googe's post.

Yes beware of the crash if you don't have significant equity (20%+) in your property and you are on a variable mortgage. Otherwise if it's a fixed rate for a term of 5 or 10 years does the crash really affect you? Other than you getting demoted or cutback in your job/salary affecting your ability to pay it I suppose.......

So some people are waiting until a crash occurs before they buy. Here's what I don't understand.

Assuming today you buy a $400k house with 25% down so a $300k mortgage at 6%. 25 year amortization $1932/month.

The crash occurs and over night this house is now worth $300k and interest rates have doubled (is this reasonable?) to 12%. You put 25% down so a $225k mortgage at 12%. 25 year amortization $2370/month.

Am I missing something here?:nut: :dunno:

Altezza
08-30-2006, 02:16 PM
Originally posted by googe


really though, the market has never gone down, ever. if you take a specific time frame and see that there was a drop then widen that time frame and the end will always be higher than the beginning. since everyone likes to use the 80s as an example, look at how low it temporarily dropped, and then look where it went afterwards. anyone that held on to their properties throughout that time is laughing all the way to the bank now.

I think you are seriously misinformed. I have first hand experience with rental and investment properties thru the 80s. Laughing to the bank now? For those people who held onto their properties during that time, it was a HUGE risk and gamble to take. Those who did paid dearly during those times. Sure, it's all 20/20 hindsight now, but when mortgage rates were in the double-digits, people were selling homes and investment properties for a $1. Even then, you were hard pressed to find a buyer. Vacancy rates weren't the best either so even finding tenants wasn't the easiest of tasks. And that's assuming they could even afford to pay the rent. Holding onto your property either by choice (or forced circumstance) costed you a lot during those times. Laughing to the bank? Not really when you conisder what people had to go thru and give up.

People will sit around and assume that all these good times are here to stay. If you don't understand that everything is cyclical, you are destined to fall with the rest of the lemmings.

googe
08-30-2006, 02:52 PM
^the point im trying to get across is that the people that lost out during those times would not have lost had they played their cards right. as max_boost said, if you have enough equity then you can sustain it reasonably. if youre spread far beyond your means then yeah, watch out. but if you do it properly and can hold your property throughout a crash then youre sitting even better in the long run. and hey, if everyone else has to bail out, you might even pick up a few properties "on sale". its not like it wont go back up. if youre not prepared to wait a few years in the event of a catastrophe then you have no business investing. stocks are different, they can stay down. the population isnt getting any smaller and people need somewhere to live.


haha i actually think the worst thing for our market is all the misinformation that will scare people out of buying. i guess that wouldnt be so bad, cause then rents will just go up.

is300izo
08-31-2006, 12:05 PM
I am loving this discussion guys, great input. Yea i think that in the next year we are going to see dramatic increases in rent, and actually it has already started. Overall I am taking the view that things are still strong here and will continue to be like this for the next little while but I will sure to sell this property next year for I dont want to take any long term risks.

adamc
08-31-2006, 03:49 PM
you can rent it to me for $1500, under the table, with the option to boot me out whenever (with a month notice)

is300izo
09-01-2006, 11:26 AM
wow that sounds like a great offer but no thanks.

Canmorite
09-01-2006, 12:37 PM
Keep it. 250,000 people estimated to move to Calgary in the next 10 years. Your property value will continue to rise, until the boomers start to die off.

This talk of a 'crash' in nonsense. Yes there are pullbacks, but Alberta's Economy does not exactly follow the rest of the nation, as shown in other examples.

Just watch your property taxes and make sure those are covered.

D. Dub
09-01-2006, 12:43 PM
Originally posted by sputnik
There are no guarantees in real estate. It can drop just as fast as it goes up. .

Now thats good advice!!!!

D. Dub
09-01-2006, 12:47 PM
http://www.theglobeandmail.com/servlet/story/RTGAM.20060831.whousingbubble0831/BNStory/Business/


TD sounds warning over Western Canada housing market

richardchan2002
09-01-2006, 01:05 PM
Originally posted by Canmorite
Keep it. 250,000 people estimated to move to Calgary in the next 10 years. Your property value will continue to rise, until the boomers start to die off.


Don't believe everything you read in the papers. That's assuming that growth continues linearly based on the last couple of years of data. Growth is never that linear.

googe
09-01-2006, 02:57 PM
study published in paper credibility > beyond credibility :D

Canmorite
09-01-2006, 03:24 PM
Originally posted by richardchan2002


Don't believe everything you read in the papers. That's assuming that growth continues linearly based on the last couple of years of data. Growth is never that linear.

Of course, but I get my info from somewhere.

That, and the 1.3% vacancy rate in Calgary, and the 60+ people moving here a day.

googe
09-01-2006, 03:55 PM
^

and, well, stuff like this:


Originally posted by adamc
you can rent it to me for $1500, under the table, with the option to boot me out whenever (with a month notice)

;)

pinoyhero
09-01-2006, 03:56 PM
If you can stomach the market swings and hold it as a long term investment, 10+ years then keep it, otherwise get out and go with something more stable...I believe max suggested a great mut fund in another post.