Sell vs. Rent Out for the next couple years

[haggis88]

So getting sick to the back teeth of working in the field, but having sent out close to 200 resumes or applied on company online applicant systems, nothing in town is materialising, at least not anything that would have me in my own bed every day/night (Shift work wouldn't bother me, but that's Off Topic)

I've had 2 job offers back home for lucrative positions that are really appealing to me, and my fiancee is on-board with moving over to Scotland with me (she's Calgarian).

We just bought our place in Copperfield last August and now since the chance of us moving is extremely likely, we're trying to work out whether we'd be better selling or renting our place out.

Obviously there's pros and cons to both...just wanted a little non-biased input from beyond

Rent out:
Pros-

• We keep the house
  ability to move back if we wanted
  build up some equity
  We'd leave it fully furnished and pet-friendly (quite a rarity for 3-bed detached in Calgary by a quick search) so it should be easily rentable

Cons-

• No guarantee of rent, if we get squatters who wreck the place, the law is in their favour
  Management company dealing with stuff whilst we are 5000miles away
  Added stress of extra and potentially complicated foreign taxes
  Double mortgages since we'd buy in the UK fairly quickly too
  Having to leave savings here incase something craps out, especially since its a 2006 build
  How is the market going to look over the next couple of years? Is it just going to crap out completely and we'll have a big lump of wood worth fuck all?

Sell:
Pros-

• No Stress to worry about what's happening with the place
  Extra money to help with the move
  Probably going to have to take a bath on our vehicle purchase, although we did try to minimise that with a larger downpayment too, but again, the money would help here

Cons-

• How quickly would the place sell
  We just moved in and haven't really had the chance to fix some of the niggles we found when we were buying
  Loss of equity - we did only put 5% down, but got a decent price on the house to begin with, so hopefully minimised any losses like that
  RRSP HBP withdrawal - Do i still have the 15 years to pay this back or would I need to dump the full amount I withdrew back in there? Or could I just take the hit on the taxes since I'll be leaving before year end, my earnings would be low anyway and i'd probably have overpaid already

Thanks for taking the time to read this, just one of the many things that we're thinking about right now but we don't really have any unbiased sources to draw from, nor do we know anyone who's done it to ask for first-hand advice

[Hallowed_point]

I'd say keep the place if you can. I don't think either option will be particularly beneficial to you.

[Feruk]

You've got 5% down. My understanding is you need 20% for non-owner occupied rental property. If that is in fact correct, I don't think you have any options.

http://www.ratehub.ca/investment-property

Based on your comments, sounds like you're gonna get creamed on the resale of the house and vehicle...

[phreezee]

Originally posted by Feruk
You've got 5% down. My understanding is you need 20% for non-owner occupied rental property. If that is in fact correct, I don't think you have any options.

http://www.ratehub.ca/investment-property

Doesn't apply if you already own it. You can buy another house for 5% down as long as you use it as your primary residence and keep the old one with only 5%.

[mr2mike]

I didn't read where you potentially have the fee to break the mortgage early.
That's a con for if you sell.

Consider you'll be paying a property managment company ontop of the rental. Will you come out in the black? Base that on the local rentals in area.

Pro: Your salary could see a bump based on exchange rate for when or if you move back.

Con: Cost and hassle to move overseas. Probably a lot of paper work for your wife.

[Rocket1k78]

Depending on your mortgage payment would rent even come close to covering it? The rental market is brutal now and i dont see it picking up anytime soon and with 5% down that payments gotta be up there.

Also avoid pets unless you get really desperate, all it takes is 1 shitty pet owner and you can end up replacing all the flooring and more.

If you're going to keep it then a management company is probably the only way to go but keep in mind they take a cut of the rent each month and if a problem were to arise they'll take fix it for you but theyre also going to send you the bill whether it be overcharged or not.

[max_boost]

Some people are content with renting out and breaking even and arguing that someone else is paying off the mortgage. The house deteriorates over time and that's why I hate renting a near new place. I hope all the equity built up doesn't go back into the property fixing it making it a wash

Or on the flip side anything is possible. Calgary booms again, oil hits $200 and average home prices hit $750k.

[nobb]

Based on the average value on detached houses with double garage and their rental rates, I would say you would roughly break even on cash flow especially if a property manager is involved. Maybe even at a loss due to the 5% down. However, renting it out if you can is still better than losing equity selling in these times.

The 20% down rule is only to get a mortgage with the intent on it being an investment (rental). After the mortgage is obtained, who is to say what you can and can't do with the house?

[Feruk]

Originally posted by nobb
After the mortgage is obtained, who is to say what you can and can't do with the house?

I would've figured the guy who owns 95% of the house (lender) would be the one to say.

[Xtrema]

Originally posted by phreezee


Doesn't apply if you already own it. You can buy another house for 5% down as long as you use it as your primary residence and keep the old one with only 5%.

This practice has been discontinued in 2014.

CMHC backed mortgage is why you can do 5% downpayment. CMHC won't back 2nd mortgage now so any houses you buy after that will need to have 20%+ downpayment.

As for OP, I think it will be a wash to pay someone to manage it while you are back in Scotland. With 5% down, assuming house worth $400K+, I don't think you will have positive cash flow and you won't make enough money to cover wear and tear.

So even if you rented out year round, you may still lose money monthly.

[Hallowed_point]

Originally posted by Feruk
I would've figured the guy who owns 95% of the house (lender) would be the one to say.

Yes.

[nobb]

Originally posted by Feruk

I would've figured the guy who owns 95% of the house (lender) would be the one to say.

Unless there are terms in the mortgage that say it can only be owner occupied, they've already lent out the money and only care about you paying it back on time. Whether they choose to renew or not is another story. It is only during the approval process that your intent is declared as a primary residence or rental, of which it changes how they decide to lend money.

But I could be wrong on a CMHC backed mortgage with 5% down.

[Xtrema]

Originally posted by nobb
But I could be wrong on a CMHC backed mortgage with 5% down.

CMHC will only back 1 mortgage. As I said, they stop backing 2nd mortgage in 2014.

[haggis88]

I definitely wouldn't be buying a second property in Calgary, so the 5% down and buy-to-let mortgages don't really worry me.

Haven't looked at the small print of my own mortgage with regards to rental, since it wasn't the intent when we purchased, so we may actually be SOL anyway and this could be a moot point!

I also didn't see the bit about cancellation or early settlement fees, but I may just have overlooked it and will check again with the paperwork in front of me

Originally posted by Xtrema

As for OP, I think it will be a wash to pay someone to manage it while you are back in Scotland. With 5% down, assuming house worth $400K+, I don't think you will have positive cash flow and you won't make enough money to cover wear and tear.

So even if you rented out year round, you may still lose money monthly.

Thanks for the post Xtrema - I'd be content with breaking even or possibly being a little bit in the red, but not too much, as obviously I'd have a mortgage in Scotland to worry about (albeit a much much cheaper one). I'm not looking to be one of these Property moguls who has 10 houses and makes a living off renting them out.

I do have a good cushion going at the moment, of basically 4-5 months bills between my TFSA and Chequing acct to cover any disasters like a furnace replacement or appliances if needed.

Just on a general browse of the rental market, what i've noticed is that rental asking prices for similar homes are just over what I pay on my mortgage + taxes by anywhere from $50-100/mo, which is why I'm even toying with the idea in the first place

We did get an excellent rate on the mortgage and kept it well within what we actually got approved for (by like $150,000), and even though the house is in a great area, it's still just a starter home with no garage, so well under the $400k mark you are thinking of

[Xtrema]

Originally posted by haggis88

Just on a general browse of the rental market, what i've noticed is that rental asking prices for similar homes are just over what I pay on my mortgage + taxes by anywhere from $50-100/mo, which is why I'm even toying with the idea in the first place

We did get an excellent rate on the mortgage and kept it well within what we actually got approved for (by like $150,000), and even though the house is in a great area, it's still just a starter home with no garage, so well under the $400k mark you are thinking of

Under $400K is better. Rate of return is less the more expensive the home is. Executive rental market isn't hot either.

When you say the rent listing is around $50-$100 more than your current mortgage+tax, that barely covers management fees (6-10% of monthly rent). You also have fees on turnovers. So you won't be cash positive but you would still make a profit of ~$6-800/mth (estimate) for principle payment.

So if nothing breaks and rent is steady, you will still have around 30-40% return on your 5% downpayment (~$20K I assume).

The only thing I didn't account for is how this income is being taxed in Scotland.

[DTTB_36]

As I will be going through the exact same thing, one thing you are forgetting is taxes. Will owning a house in Canada still make you pay Canadian taxes? Since you will be renting it out, you can point that out but still something to think about.

[mr2mike]

Originally posted by haggis88

Haven't looked at the small print of my own mortgage with regards to rental, since it wasn't the intent when we purchased, so we may actually be SOL anyway and this could be a moot point!

I also didn't see the bit about cancellation or early settlement fees, but I may just have overlooked it and will check again with the paperwork in front of me

When in doubt, just call to mortgage company (not the broker) and see what it would cost to break early. They can usually tell you. All depends on if its open or closed mortgage, can you port it over to a UK residence (unsure), or how many yrs you have left before renewal, etc.

If you've owned under a year and go to sell, I think you get pegged with capital gains tax even if it's your personal residence. Sell 1 day after a year and you're fine.

[pheoxs]

I would sell it because otherwise you have to deal with the headache of a management company, filing taxes in both countries, and dealing with any issues while havng a ~7hr time difference.

Unless you absolutely love your house and want it later or it has a family history I'd dump it and then look at a new place if/when you come back.

[leftwing]

Since you don't really have a preference either way, why don't you do both. Put it for sale and for rent and see if either option materializes in your favour.

[Khyron]

Sell it. House prices certainly aren't going up and if it's under 600K it will probably move, even if you take a slight loss.