Using AI Legalese Decoder to Navigate Selling or Renting Property at a Loss
- November 7, 2023
- Posted by: legaleseblogger
- Category: Related News
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1. Current Situation with Vacant Apartment
My apartment is currently sitting vacant and this is causing me some financial concerns. I have a fixed mortgage with a 5.3% interest rate and I have invested $50,000 as a down payment for the property. Unfortunately, I have very little equity otherwise. If I were to rent out the apartment, I would be facing a monthly loss of approximately $175.
2. Realtor Advice and Considerations
After seeking advice from a realtor, I was informed that I could potentially sell the apartment for around $30,000 more than what I initially paid for it. However, it’s important to consider the various transactional costs that would need to be covered if I were to sell. These include realtor fees, taxes associated with the short ownership period, lawyer fees, and the mortgage buyout.
3. Financial Consequences and Possible Solutions
Despite the potential profit from selling the apartment, the transactional costs could quickly diminish any gains. As a possible alternative, I am considering withdrawing the original $50,000 investment and placing it in a Guaranteed Investment Certificate (GIC) for a period of time.
4. Decision Dilemma: Sell or Rent?
I am currently grappling with the decision of whether to sell the apartment or continue renting it out at a monthly loss. The fact that I have no emotional attachment to the property only adds to my uncertainty. This is further compounded by the circumstances surrounding the initial purchase, which was a result of a difficult personal situation.
5. Future Plans and Long-Term Goals
Looking ahead, I have no intention of living in the apartment and my long-term plans involve starting a family and potentially purchasing a larger home or renovating my partner’s property. This further complicates the decision-making process as I consider the best course of action for my financial and personal well-being.
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****** just grabbed a
So there negative cash flow is $175 a month. If thatÔÇÖs accurate, thatÔÇÖs not a lot. Assuming this includes total carrying costs like property tax, maintenance, etc.
For your mortgage payments, how much per monthly payment is going towards the principal? If that amount is more than $175, youÔÇÖre still building equity/ growing net assets.
And I’m not so sure you can count on selling for 30K more than you bought it for. Just because a realtor told you that doesn’t make it so. They tend to quote high numbers just to get the listing.
Cash flow negative by 175 or actually losing 175 after deductions and principal considerations?
If the former, you may still end up with a profit because you are building equity. Not saying it’s better to keep but it’s important you understand the difference.
Lol! People think itÔÇÖs a loss when they canÔÇÖt rent for more than their expenses?
Like you just think someone else should be buying you your condo??
ItÔÇÖs an investment. DonÔÇÖt you think YOU should be contributing something??
Someone is paying for all of your expenses on this ÔÇ£investmentÔÇØ except for 175$ boohoo. Sell it.
Sell. No reason to hang on to something you don’t really want.
Keep it if you’re only “paying” $175/month for someone else to otherwise cover the mortgage, taxes, condo fees, etc.
Your mortgage rate is fixed so you’re safe there as long as you have tenants. Cash flow aside, your consideration should be how much equity is being earned via principle reduction every month.
You will have to do a little extra work at tax times but can also claim depreciation to offset taxable net income, within a certain threshold.
Do NOT rent it UNLESS you want to actually be a landlord. Also remember you will be responsible for repairs and maintenance, so you will be out more if something occurs. So many people just are like “eh dont want to sell it Ill just rent it out”, then become landlords people hate because they dont know what they are doing.
DonÔÇÖt ask this thread because they will all completely disregard macro economic factors and your overall personal asset portfolio and risk diversification and tell you to hold onto the real estate and just pray it just goes up.
Personally IÔÇÖd rather invest the $50k with interest rates where they are rather than borrow 10x that amount and pay the interest and hope I get lucky on real estate.
Sell
>To rent it I will be in a loss each month around $175.
Would you buy this unit today in order to rent it out? Do you want to be a landlord, i.e. do you want a part-time job? Do you want to deal with tenants not paying their rent? Damaging your place?
>I donÔÇÖt love the apartment at all, I panic bought it in a tight situation.
Forgive yourself for your choices. It was a tough time for you. Sell and move on.
High chances are if you decide to rent it out and the tenant stop paying. YouÔÇÖll be in bigger trouble. IÔÇÖd better hold onto the property as we are slowly getting out of a global crisis with interest rates OR you can just sell the property.
The real question is can you afford the mortgage and do you want to be a landlord? If no then sell it, if yes, consider keeping it.
I don’t want to give you a dad speech but man.
Your decision making on all fronts needs to be re-evaluated.
Getting Pregant and Buying a property should not be done on impulse. Especially with all the protection options and information that is out there. These are big decisions that come possibly big consequences.
First off why didn’t you rent and save the $50,000? (Or use as needed) And see how things go.
If you have no intention in being in the landlord market, then sell and cut your loss or possible gains (depending how it shakes out). You are on the hook for all the interest if you break your fixed rate mortgage and 3 months only for a variable.
Sell, for sure. Don’t stay tied down to this.
Is the 175 a loss or an investment? Depends on viewpoint.
Sell.
You may want to speak to an accountant before you decide. $2,100 a year loss isn’t too bad, and as u/shpeucher mentioned, you can claim that loss for a couple of years. You can also claim the interest you’re paying while you’re renting the apartment out as an expense, and the drop in your tax rate might get that operating loss back.
When you ‘claim’ an amount as a cost of business on your taxes, that amount comes off your gross income (pre tax earnings), instead of your net (after tax). This could help free up some of your income by lowering the amount you pay in tax – especially while you’re early in the mortgage and paying a lot of interest.
The bigger question is, do you want to be a landlord? Tenants have a lot of rights in Canada, although Alberta is fairly landlord friendly. You could rent to someone for a six month or one year [term](https://www.alberta.ca/ending-a-tenancy) and see how you feel about the whole thing when the lease is up. Before you sign a rental agreement with someone, get advise from an experienced landlord in your province, and help drafting the terms for your agreement. If you pay someone for this, it’s also an expense, and can go on your taxes as well.
What’s the big issue here? If you can easily swing $175 a month that’s not a bad deal given the market these days. Positive cash flow condo rentals are tough to find right now. I’d be happy to only pay $175 a month out of pocket on my rental(if I had one).
Sell, RE market will take a bigger hit, this ain’t the bottom
You wouldn’t be renting at a loss. You just wouldn’t have a free real estate investment.
Unless you considerpaying $175 a month for a real estate investment a loss, that’s fucking crazy.
Airbnbable? Alberta isn’t getting rent control in the near future either, so you might be ahead within a year or two on it.
Sell!
Why did you buy the condo to begin with and why are you selling now only a year later?
A carrying cost of only $175 a month is great, just depends on whether or not you want to deal with the business of being a landlord
Keep renting unless you really cannot afford it