All Forum Posts by: Soumojit Sarkar

I own a condo in BC but live in the US. I had issues with renting out the place earlier, and the current rent doesn't cover even the mortgage interest, let alone other expenses like property tax, insurance etc. The current tenant is about to leave at the end of the month. I'm considering selling the unit instead of finding another tenant. But not sure about it since the market is at a low point right now. At the same time, I fear that a new tenant might stay there for ever and interfere with the sale at a future date. What do you suggest?

Sounds like a deep dive into the numbers is what you need.

1. What are you losing annually with a tenant in place? What are you using for vacancy %? What possible maintenance and or CapEx expenses are coming up? You need to account for debt paydown, tax benefits, and depreciation as well.

2. What is the place appreciating annually?

If the annual appreciation far outweighs the annual cash flow losses, it may be worth holding.

If you have no idea how to set up a pro forma that will answer #1, and #2 your issue may or may not be the numbers on the condo, it may be your analyzing technique.

The answer is a combination of knowing the numbers, your projections of those numbers in the future, and your confidence in your ability to do the analysis.

Agreed, I was too lazy to run the numbers yet, being dissuaded by the not so promising prospects in either option. Sometimes you only want to find more details about a news that pleases you! 😀

But I have to get to it since the right choice here doesn't seem to be that obvious.

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Quote from @Stevo Sun:

Quote from @Soumojit Sarkar:

Quote from @Stevo Sun:

Quote from @Soumojit Sarkar:

You basically outlined your issues and no one can help you with that.

1) The market is the market. If you are burning money each month then the question is really how bad is it for you. Can you afford to hold on till it's a better market? Does the math make sense?

2) Will a new tenant even cover your costs? Or are you still going to be cash flow negative? Tenanted properties are extremely challenging to sell and the recent change in notice period has made that worse in BC.

You are in a tough spot either way, only you know your financial situation and your numbers.

Even after renting it'll not cover even the mortgage interest, let alone other costs.

Another alternative is to never sell and keep drawing some cash out of it by refinancing when the interest rate hits a low. Any idea whether that is feasible?

I mean you can hold the property indefinitely if you can afford to. If the rent can't cover even the interest then I'm not sure cash out refi does anything for you.

Yep, I am probably thinking of this just as an excuse to hold on and weather out the market lows. But one argument in favor of refi is that you can get cash at a low interest rate to invest in stocks or other assets. Once you sell, you just walk away with what profit the market gives you at that time. But if you keep doing refi, you let the property recover in value over a longer time horizon w/o losing out too much on investing elsewhere.

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Quote from @Chad U.:

Quote from @Soumojit Sarkar:

What makes you think it's at a low point right now? Have you researched the macro fundamentals in Canada currently?

I haven't done any thorough research and my comment was not about the entire Canadian market, I can notice some correction in my local market anecdotally. I think this might be a low point because the Canadian government is trying to pump the housing market before the election next year by lowering rates, relaxing mortgage insurance conditions etc.

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Quote from @Stevo Sun:

Quote from @Soumojit Sarkar:

You basically outlined your issues and no one can help you with that.

1) The market is the market. If you are burning money each month then the question is really how bad is it for you. Can you afford to hold on till it's a better market? Does the math make sense?

You are in a tough spot either way, only you know your financial situation and your numbers.

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Are there still some city/suburbs in Canada where you can cash-flow positive/breakeven as an investor in the condo/townhouse market?

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Quote from @Theresa Harris:

Quote from @Soumojit Sarkar:

Quote from @Stevo Sun:

I think cash flow in major cities in Canada is hard to find. They are out there but usually in the 'not the best' neighborhoods. Real estate in Canada vs. the US is wildly different. Finding something cash-flowing as soon as you buy would be challenging in the locations you mentioned. You need to look for something you can handle while paying the mortgage and waiting for rent to appreciate. So eventually, your mortgage payment will be lower, and the rents will be higher, then you can cash flow. Hopefully, at the same time, your property has also appreciated a bunch!

@Stevo Sun: But you cannot get rid of old tenants unless you move-in yourself or do significant renovations?

It depends where you are and how they are renting. In BC with annual leases, yes you can. You just don't renew their lease. Month to month are a bit harder, but still possible. Other areas, eg AB, you give appropriate notice if they are month to month.

AFAIK, all annual leases become month-to-month automatically after the lease duration in BC (at least in the Greater Vancouver area). Please correct me if I am wrong.

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Are there any city/suburbs (small/big) in Canada where you can still break-even in terms of cash-flow as an RE investor?

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Quote from @Stevo Sun:

@Stevo Sun: But you cannot get rid of old tenants unless you move-in yourself or do significant renovations?

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All Forum Posts by: Soumojit Sarkar

Soumojit Sarkar has started 3 posts and replied 9 times.

Post: Hold on sell

Post: Hold on sell

Post: Hold on sell

Post: Hold on sell

Post: Hold on sell

Post: Cash-flow markets in Canada

Post: Is real estate investing for cash flow still possible in Canada?

Post: Cash-flow markets in Canada

Post: Is real estate investing for cash flow still possible in Canada?