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Thread: What to do with a cheap rental property in Calgary?

  1. #1
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    Default What to do with a cheap rental property in Calgary?

    Hey guys, need to get some Beyond insider advice, as I'm no longer in Calgary and have no real idea what the real estate market is doing.

    So my wife bought a condo right across from the Foothills hospital when she graduated high school and has been renting it out ever since. It's nearly paid off, but unfortunately it didn't appreciate much in value (despite being purchased well before the 07 run-up). She bought it for ~$150k and it's probably worth around $220-250k now.

    Her last tenants trashed the place through prolonged negligence so now she is in the midst of a full reno (ripping out floors, new kitchen, new paint, etc), which will probably be 20k.

    My preference would've been to not do any renos and fire sale the place at like $210k for someone to buy and reno... but looks like there's another unit in the complex getting firesale'd that dropped their asking price from $219k to $199k and still isn't moving... they haven't listed any pictures of the inside of the unit so I'm guessing it's in really rough shape. The $199k unit.

    There are 8 total units for sale in the complex betwen 235k-270k... they were going for around $250k last summer, but they don't seem to be moving at all now.

    rentals.jpg

    We can either finish the renos and join the fray and see if we're lucky getting it sold, but it's looking like it'd be better to just rent it out and see if the market recovers? We moved from Calgary in 2019 and haven't been following the market closely, but it does look like pricing recovered slightly in July.

    Once the renos are done, her unit will look pretty close to this one, except with a more modern IKEA kitchen:
    Comparable Unit

    What would you guys do in this environment... try to sell it for ~$225-240k or rent it out for $1300/m (450 condo fee + 140 tax) and see if the lower end of the housing market recovers and sell it in like 3-4 years?

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    Tbh what do you wanna do? You're a smart dude.

    Myself I don't want the hassle so I would sell and dump the proceeds into the markets. Calgary real estate is probably going sideways for years.
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    Quote Originally Posted by max_boost View Post
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    Tbh what do you wanna do? You're a smart dude.

    Myself I don't want the hassle so I would sell and dump the proceeds into the markets. Calgary real estate is probably going sideways for years.
    +3 that's an asset class I woukd want to own less of. Sell and dump into Brookfield renewables. Bet it wins over next 10 years.
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    honestly, I don't see the market recovering for a long while, and see it sliding even more. If you are comfortable fire saling it, list it for the same $199k as the other unit but yours is renovated. Even with dumping 20K into the renos, you will still be 30K ahead of your original buy price, plus you get all that money out of the market and can put it to better use.
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    i vote to keep. that location will forever be in high rental demand because of FMC, uofc health sci and also with the cancer center going up too. what i would do is refinance to the max, do a nice basic reno which you can claim against and be more diligent with the renters. then invest the equity balance in the markets or other opportunity as you see fit. obviously a lot of other factors to consider, ie your finances, not living in the country etc but it's not a huge amount. this practice has worked well for me over the years and believe that i have come out ahead.

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    I would agree with the above with the caveat that renting, particularly remotely, isn't causing unnecessary stress.
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    It really surprises me that a property in St Andrew’s heights hasn’t appreciated a bunch over that time frame.

    Maybe worth running things past Jordan to pick his brain?

    That location has a lot going for it generally speaking. Probably prime for an eventual redevelopment no? (Thinking one of those RNDSQR developments for a bunch of busy doctors with bank?).
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    Airbnb it. Close to FMC you'll get fairly decent revenue. Just hire someone to do the cleaning and leg work.

    The ones down by south health get decent revenue clearly and there's a ton of them.

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    Where do you guys get off saying it hasnít appreciated much? Weíre talking like 65% between purchase and est current sale price.

    Although I suppose it hasnít gained 350% in a few days like some of our big dick day traders get, maybe thatís the baseline everyone is using.

    And no, I donít have anything of value to add.

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    Quote Originally Posted by kJUMP View Post
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    i vote to keep. that location will forever be in high rental demand because of FMC, uofc health sci and also with the cancer center going up too. what i would do is refinance to the max, do a nice basic reno which you can claim against and be more diligent with the renters. then invest the equity balance in the markets or other opportunity as you see fit. obviously a lot of other factors to consider, ie your finances, not living in the country etc but it's not a huge amount. this practice has worked well for me over the years and believe that i have come out ahead.
    This. Be sure you decide either way before you pick start putting it together. If it's a rental, go for more durable stuff (especially since you aren't local)

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    Quote Originally Posted by cjblair View Post
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    Where do you guys get off saying it hasn’t appreciated much? We’re talking like 65% between purchase and est current sale price.

    Although I suppose it hasn’t gained 350% in a few days like some of our big dick day traders get, maybe that’s the baseline everyone is using.

    And no, I don’t have anything of value to add.
    Well, you have to consider the entire post.

    Sure, the value has increased 65%, but that's over 13 years or so... But then you have to also consider the other parts of the post - like the part where she's paying ~$600 per month in condo fees and taxes. That's ~$7k per year, or over $90k over those 13 or so years... So, how far ahead is she really?

    But, at least she had that initial run up in value... Lots of Calgary has seen near enough to 0% increase in property value over the last decade...

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    Previous increases or decreases have no bearing on decision to sell.

    Easiest way to look at it is this: would you buy this property today for an investment? If not, sell.
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    Sell and dump into TSLA. Bet it wins over the next 10 days.

    Disclaimer: Don't do this. Your wife may leave you for her boyfriend if this goes wrong.
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    Quote Originally Posted by ExtraSlow View Post
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    Easiest way to look at it is this: would you buy this property today for an investment? If not, sell.
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    Thanks guys, appreciate the thoughts and advice.

    Biggest worry on my end is just the time and effort it would take selling it into a slow market with 8 competing units.
    There's only one unit in the complex listed for rent right now, might be an easier short term solution, kick the can down the road a few years.

    In the long run, I figure the low end of the market can only drop so much before people from high cost cities like Vancouver or Toronto start moving for cheaper housing and similar work. Sure O&G is hurting, but that should move the 600-800k buyers into the 400-600k market, and 400k buyers to 300k, etc etc. Hard to see condos getting much cheaper than 200k in Calgary (right?!), but then again I don't really know the market.

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    Quote Originally Posted by killramos View Post
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    It really surprises me that a property in St Andrew’s heights hasn’t appreciated a bunch over that time frame.

    That location has a lot going for it generally speaking. Probably prime for an eventual redevelopment no? (Thinking one of those RNDSQR developments for a bunch of busy doctors with bank?).
    Quote Originally Posted by kJUMP View Post
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    i vote to keep. that location will forever be in high rental demand because of FMC, uofc health sci and also with the cancer center going up too.
    Yeah, I'm also surprised these units haven't moved much in value given proximity to FMC/UofC and the new cancer centre... I guess cheap condos aren't what baller doctors are going for

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    Quote Originally Posted by The_Rural_Juror View Post
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    Sell and dump into TSLA. Bet it wins over the next 10 days.

    Disclaimer: Don't do this. Your wife may leave you for her boyfriend if this goes wrong.
    Ah, this is some Beyond circa mid/late-2000s advice right here

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    Don't downplay your rental property in being so binary in profit or loss. Property is always the long game.

    You are in a great location in regards to it being close to the hospital. Also you have to factor in the opportunities it gives you in terms of access to capital and what problems it allows you to solve in your current life stage.

    You can rent the property and pull the money out in a HELOC and use it to buy a new Honda CRV. Have the renters pay down the HELOC.

    Or sell it, then think of how you can use the cash in your current life stage(and buy... a new Honda CRV). What up coming problems does it allow you to solve...?
    A lot of people would love to be in the situation you are in. Your girlfriend bought the property, its almost paid off. You had cashflow through rental income.

    What im trying to say is, flip the perspective. Dont have the Condo as the centre of how you look at the issue. Flip it the other way. Look at you and your partners finances and where you are going. What opportunities does the rental or selling (having cash) give you in your overall financial picture? What are the long term opportunities that both scenarios give you?

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    Quote Originally Posted by Super_Geo View Post
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    Yeah, I'm also surprised these units haven't moved much in value given proximity to FMC/UofC and the new cancer centre... I guess cheap condos aren't what baller doctors are going for
    After speaking with a property manager who owns a lot around the city, far and away (her words) the units by the Foothills are the easiest to rent and yield the best tenants because nearly all of them are med students or residents (overall normally clean folks who aren't home a lot and have money via outrageous LoC). In hindsight I wish I had bought closer to the Foothills.
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    Quote Originally Posted by kJUMP View Post
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    i vote to keep. that location will forever be in high rental demand because of FMC, uofc health sci and also with the cancer center going up too. what i would do is refinance to the max, do a nice basic reno which you can claim against and be more diligent with the renters. then invest the equity balance in the markets or other opportunity as you see fit. obviously a lot of other factors to consider, ie your finances, not living in the country etc but it's not a huge amount. this practice has worked well for me over the years and believe that i have come out ahead.
    fuck ya! Lever that shit up!

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    Quote Originally Posted by you&me View Post
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    Well, you have to consider the entire post.

    Sure, the value has increased 65%, but that's over 13 years or so... But then you have to also consider the other parts of the post - like the part where she's paying ~$600 per month in condo fees and taxes. That's ~$7k per year, or over $90k over those 13 or so years... So, how far ahead is she really?

    But, at least she had that initial run up in value... Lots of Calgary has seen near enough to 0% increase in property value over the last decade...
    Living expenses are just that - expenses. They are not to be capitalized. What is appreciate equal to if "didn't much appreciate = 65%"?

    This is like buying a base Porsche 911 for $100k and 13 years later claiming it is worth $165k because you had insurance, maintenance and storage costs.

    OP:

    If you consider yourself a real estate investor make an offer to the rest of the unit owners and purchase the whole building and renovate it. Then rent the units, or sell to a REIT.

    If you do not consider yourself a real estate investor sell at whatever the market offers you - regardless of previous valuations.

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    Quote Originally Posted by Nakadah View Post
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    Living expenses are just that - expenses. They are not to be capitalized. What is appreciate equal to if "didn't much appreciate = 65%"?

    This is like buying a base Porsche 911 for $100k and 13 years later claiming it is worth $165k because you had insurance, maintenance and storage costs.

    OP:

    If you consider yourself a real estate investor make an offer to the rest of the unit owners and purchase the whole building and renovate it. Then rent the units, or sell to a REIT.

    If you do not consider yourself a real estate investor sell at whatever the market offers you - regardless of previous valuations.
    Except since this is an "investment" property, things like property taxes and condo fees aren't "living expenses", but just "expenses" that diminish the net income and ROI.

    You can dismiss them if you want, but the fact is, they're real costs that have been paid and after they're accounted for, the return on this investment is dog shit.

    OP - All the talk of location and med students hasn't meant squat through the last two(ish) booms in Calgary. And if it hasn't performed through this period, waiting for things to turn back in Calgary's favour again is just willful ignorance. There are literally hundreds of better places to put ~$200k to work for you than YYC real estate... dump the place and don't look back.

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