North York Condo - 2% cash flow only. Any reason to keep it??

[Manny K.]

Dear BP Gurus, 

I am a newbie here. My aunt (single, widow, retired) owns a 2 bed 2 bath condo in North York worth ~$300k CAD. She wants to move to US permanently and is trying to decide if it makes ANY sense to hold on to the condo as a rental after she moves. Due to the unusually high monthly HOA dues and other expenses (taxes, property mgmt, insurance, vacancy allowance, misc repairs reserve etc), she can only expect a net cash flow of $500/mo realistically - which is just 2% on the $300K capital. I have no idea if we can expect any meaningful capital appreciation over the next 5 years - to justify holding it.

What are your thoughts?  A couple of other points:

1) The condo is nicely furnished. I was wondering if leasing it as a fully furnished unit can increase the cash flow significantly?

2) If she sells the condo, the equity will mostly be invested in some diversified, (almost) risk-free fixed-income investments yielding ~5% annually. 

3) Are there any other options (other than traditional renting or outright selling) that can benefit her more? Like - rent-to-own, or owner-financing etc?  

4) How easy is it to either do a FSBO or direct sale to some RE investor (outside MLS?) - to save on selling transaction costs?

Thank you! 

- Manny

[Gary McGowan]

A few thoughts here. (I live and invest in the GTA)

The question here is will the money she has invested in the Condo work harder for her in another investment? You mentioned that it could. 

Doing rent to own in Canada is an option and I have done about 15 of them. Some of them very successful while some others were not. Rent to Own in the GTA usually works better on properties that do not carry condo fees. It may be difficult to locate a qualified RTO tenant.

As for appreciation the Toronto Market has moved very aggressive in the last 5 years. While some will say the Crash is about to happen others see it moving well throughout the next few years. Most doomsayers have been saying the crash is about to happen for over 10 years and it hasn't. Hate to wonder what they have missed out on because of not being in the market. While I think there is some slow down I do not believe it will go backwards. 

Seller Financing is very, very rare here as most people can get cheaper money through the Lenders. 

Without knowing the age and quality of the condo, rental rate would approx be 1400-1900 + utilities per month. 

The other thing to consider is she moving to the States and keeps the North York Condo she will end up paying taxes in two Countries. If s

As for selling it privately I will leave that comment alone. I'm a realtor and I might be a bit bias ;) 

If she would more detailed info I can give her some advice on the complex and area.