Suggesting people sell...

[Berubeland]

Last night I went out to a rental listing for people who wanted to rent out their condo.

They paid $229,000 3 years ago, the condo is now worth over $300,000.

The condo was originally bought for their son and his girlfriend. They split up. Son makes not too good money now lives at home.

We spoke at length and I recommended they crystallize their gains and avoid the risks of becoming a landlord. They were extremely nice people but I was not sure that they would do well with a tenant.

My thinking was that their son would have to work for many many years to save that kind of lump sum at his disposal. The condo would not cash flow. They are accidental landlords.

What do you think of this? Obviously if they sell I don't get the rental listing.

[MoneyGal]

I think you are doing the Lord's work. (Substitute the deity of your choice.)

[Four Pillars]

Did you charge them for that analysis?

I'm not saying you shouldn't try to help people, but if you are in the business of renting out units, you should stick to renting them out.

If they ask for advice about whether they should sell (which is a different topic) then tell them you will analyse their situation for a consulting fee (ie $100).

[Berubeland]

The flying spaghetti monster's work you mean lol

I know what you mean Mike but I can't really figure out how to do that. I'm doing pretty well for myself another $1000 or so is not going to change anything.

I wish it was that simple for me really. After I left I felt like bad business person but a decent human being. Now everyone knows why I would make a really lousy real estate agent

[Kim]

I think you did the right thing.

[Four Pillars]

Let me put it another way.

By giving away your advice for free, you are not being compensated for the risk involved.

Let's say the couple sells the condo this year and then in four years the same condo sells for a price which is 25% than they sold it for.

What if they come after you saying they lost out on a good chunk of capital gain because they listened to your advice?

Just because you are nice, doesn't mean you are right. And when it comes to financial advice you have to consider potential liabilities.

[MoneyGal]

Yabbut she's way MORE likely to be sued if she actually offers business advice in this regard, and the liability insurance cost (if you could get it?) means it wouldn't be worth offering the service at all.

[Square Root]

I think you did the right thing.

Yes. They should sell.

[Charlie]

A client....who shouldn't be a landlord....will be a lousy client. You did the right thing.

If nothing else, you did your good deed for the day. Businesswise, there's one more person out there thinking you've got integrity. Never a bad thing.

I'd never advise someone to buy/sell based on my misguided market projections. But pointing out the hassles and potential dismal returns on renting is fair game ... and they can make their buy/sell decision from there. Part of being a professional is advising people when they're not a good fit.

[Four Pillars]

Yabbut she's way MORE likely to be sued if she actually offers business advice in this regard, and the liability insurance cost (if you could get it?) means it wouldn't be worth offering the service at all.

I think an argument could be made that she was offering business advice since she runs a landlord/real estate business. Yes, she didn't charge for it, but I'm not sure that matters.

For the record, I don't think the odds of my scenario happening are very high. Pretty close to zero in fact.

My point is that she should be charging for her expert advice or don't give it.