Advice For Selling A Condo
Question
"We're asking for some advice on the condo we're presently living in.
We need to decide to either sell it or rent it, because we're taking possession of a 1/2 duplex at end of November /08 at sale price 289,900
Condo was purchased brand new on August 2007 for $186,000.
Down payment was 46,500.
Mortgage was set up for 139,500.
25 year 6.35%
Left to pay on mortgage - $136,400.
We would list for 255,000. There are 4 condos for sale in our condo unit ranging from 247,500 - 269,000.
Ours is equal to the 269,000 (but his has been at this price since Jan 08). Market is down.
One must take into consideration that there would be no capital gains as it is our primary residence.
We could rent it for 1350/mo.
Thanking you very much in advance for your answer."Lynne
Answer
From a rental perspective, you need to determine if the property will cash flow, including all possible expenses plus a buffer for unforeseen costs. Take a look at the free analysis articles on our website for an example of how to do this.
Analyzing A Real Estate Deal (Part 1)
Analyzing A Real Estate Deal (Part 2)
Analyzing A Real Estate Deal (Part 3)You are correct about no capital gains on the sale of the property. If you convert it to a rental, however, typically the value of the property must be determined as of the date of 'conversion'. Any gains before that are tax free, while any gains after that are taxed as though it were a rental.
We recommend talking to an accountant about this to confirm details for your specific situation. We recommend George Dube of Dube and Associates. They are based out of Kitchener-Waterloo in southern Ontario, and they are very experienced with real estate investing. The distance is not usually a problem, as most consultations can take place over the phone. Feel free to contact him at the website below, and please let him know we referred you.
http://www.dubeandassociates.com/contact/contact.html
With regards to selling, condos tend to move slower during slow markets (and fastest during hot markets). I'd recommend talking to a realtor in your area to find out what the average time on the market is for a condo in your area, as well as the average % of list price they were sold for. That should help you determine an approximate sale price.
Armed with the above knowledge, you should be in a position to make your decision.
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Paul Blacquiere and Joanne Beehler are full time real estate investors and have been investing in Ottawa, Ontario, Canada since 2002. They are owners of Spirepoint Properties, a Canadian real estate investing company dedicated to making real estate investing easy.
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