I don't think interest rate will be double digit, but it's just my opinion. 
Should I sell now or hold?
I bought a house in vancouver a couple of years ago; my payment is ~3K per month but rent covers a good chunk of it, leaving me with a 10K payment. My fear is two fold. 1) I'm eating $10K per year (assuming my tenants stay long term) and 2) if interest rates hit double digits in 3 yrs time (my mtg term expires then), I could be paying close to $20K per year!
But if I sell now I take a 4-7% hit. Should I hold or sell? My job is pretty secure.
But if I sell now I take a 4-7% hit. Should I hold or sell? My job is pretty secure.
1 - 7 of 7 Posts
Even 6-7% prime rate will kill the entire bubbly Canadian real estate market, and this will happen sooner than most think.I don't think interest rate will be double digit, but it's just my opinion.
Why did you buy a house that costs you money every month that you're not living in in the first place? Are/were you planning on living there eventually? Are you renting below market to your kids? Has that original reason changed? Or was it purchased for speculative purposes from the get-go?
If it was just a speculation, and you think the market's not going to keep rocketing up (and IMHO, I don't think it will) then better to take your licks and get out early.
Unfortunately, it can be quite difficult to sell a money-losing rental: investors can ask the tenants what they pay and see that it's losing money, and starry-eyed homeowners don't want the hassle of waiting to evict a tenant before they can live the dream themselves. You might need to move in yourself first, though discounting by the price of the move might be enough to sell it.
If it was just a speculation, and you think the market's not going to keep rocketing up (and IMHO, I don't think it will) then better to take your licks and get out early.
Unfortunately, it can be quite difficult to sell a money-losing rental: investors can ask the tenants what they pay and see that it's losing money, and starry-eyed homeowners don't want the hassle of waiting to evict a tenant before they can live the dream themselves. You might need to move in yourself first, though discounting by the price of the move might be enough to sell it.
If it's not even covering your mortgage payment, then it's also not covering property taxes, maintenance/repairs, insurance, and any compensation for your time to manage it all. Plus, unless it's 100% rented all the time, you're also not even getting full rent.
I'd say it's likely costing you far more than $10k per year to keep this.
Hopefully you bought it a while back, and can sell for a profit still. I'd get out now before the market there really starts tanking.
I'd say it's likely costing you far more than $10k per year to keep this.
Hopefully you bought it a while back, and can sell for a profit still. I'd get out now before the market there really starts tanking.
I agree with Potatoe. Cut your losses and run. It seems your investment thesis was all about capital gains - ignoring operating returns and negative cash flow. I also do not see future capital gains.
For the future learn about how to measure the returns from real estate. The properties I know about in downtown Vancouver are selling at only about 3 percent return on assets. I will bet your mortgage is at a higher rate, so you are losing profit as well as cash flow.
For the future learn about how to measure the returns from real estate. The properties I know about in downtown Vancouver are selling at only about 3 percent return on assets. I will bet your mortgage is at a higher rate, so you are losing profit as well as cash flow.
I hope so.Even 6-7% prime rate will kill the entire bubbly Canadian real estate market, and this will happen sooner than most think.
1 - 7 of 7 Posts
- This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Canadian Money Forum
A forum community dedicated to Canadian personal finance enthusiasts. Come join the discussion about investing, stock portfolios, equities, frugality, real estate, market trading, taxation, retirement, and more!
Full Forum Listing
Explore Our Forums
