# Renting a condo:Management Fears



## kenvin100 (Oct 4, 2015)

I'm at a standstill whether or not I should rent or sell a condo unit. Reason why I'm renting is because I've lived there for my entire life and there is a slim chance (20%) I might move back in a year or two. I found a tenant whose cooperative (tenant's main concern is ensuring the uni is clean, quiet and neat-been living in another unit in the building and want a bigger room) and although the monthly fees are cheap for the unit, we are still making double the amount it costs for maintenance fees and property taxes. (utilities included in monthly maintenance fees which approx $700/month)

The real fear I have is condo management. Especially reading stories like this: http://www.huffingtonpost.ca/2015/09...n_8123634.html I don't want to be trapped with a unit I cannot sell or is too expensive to rent. 

Truth be told, our condo had a recent change in management due to past corruption. This was our motivation to move out. Though the new management is familiar to us in the past, I just have a fear that one day management can hike the fees ridiculously. 

In terms of selling, we have a buyer and we were able to pull of a selling price that is higher than what real estate agents sold past units for...but again, we did it WITHOUT an agent. 

Any advice on what I should do?


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## OurBigFatWallet (Jan 20, 2014)

what is the reserve fund like for the condo building? Has there been a study done recently on it? That can be an indicator on whether condo fees are going to go up (ie. if the 5 year reserve fund study is due next year and the fund is deemed too small the board will raise the condo fees to get it higher). If you rented what would your cash flows look like - what is the mortgage payment, taxes etc.? If you sold now would you have a gain or loss? These are some of the things I would consider when deciding. If you can cut lose right now with a gain I would probably do so. On the other hand if you'd be faced with a loss I would consider renting it out so long as your cash flows can break even each month.


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## kenvin100 (Oct 4, 2015)

OurBigFatWallet said:


> what is the reserve fund like for the condo building? Has there been a study done recently on it? That can be an indicator on whether condo fees are going to go up (ie. if the 5 year reserve fund study is due next year and the fund is deemed too small the board will raise the condo fees to get it higher). If you rented what would your cash flows look like - what is the mortgage payment, taxes etc.? If you sold now would you have a gain or loss? These are some of the things I would consider when deciding. If you can cut lose right now with a gain I would probably do so. On the other hand if you'd be faced with a loss I would consider renting it out so long as your cash flows can break even each month.


I'll be getting my status certificate tomorrow and will find out if there surplus or deficit in the fund. It will also tell me about the expected costs in the future. If the fund is in deficit or the expected cost in the future will put the fund in deficit, I'll sell it for sure.

I purchased the unit more than 20 years ago and the price has exceeded more than 100% of the initial cost. Even if I rent it out, I'll still have to shell out via capital gains tax. In terms of mortgage, the condo unit was paid out at purchase with no mortgage. Just don't think it worth the hassle to rent considered my family has full time jobs-unless we had nothing better to do :livid:


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## Value (Jul 31, 2015)

kenvin100 said:


> I'll be getting my status certificate tomorrow and will find out if there surplus or deficit in the fund. It will also tell me about the expected costs in the future. If the fund is in deficit or the expected cost in the future will put the fund in deficit, I'll sell it for sure.
> 
> I purchased the unit more than 20 years ago and the price has exceeded more than 100% of the initial cost. Even if I rent it out, I'll still have to shell out via capital gains tax. In terms of mortgage, the condo unit was paid out at purchase with no mortgage. Just don't think it worth the hassle to rent considered my family has full time jobs-unless we had nothing better to do :livid:



Hello Kevin, what are your whereabouts??


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## OurBigFatWallet (Jan 20, 2014)

kenvin100 said:


> I'll be getting my status certificate tomorrow and will find out if there surplus or deficit in the fund. It will also tell me about the expected costs in the future. If the fund is in deficit or the expected cost in the future will put the fund in deficit, I'll sell it for sure.
> 
> I purchased the unit more than 20 years ago and the price has exceeded more than 100% of the initial cost. Even if I rent it out, I'll still have to shell out via capital gains tax. In terms of mortgage, the condo unit was paid out at purchase with no mortgage. Just don't think it worth the hassle to rent considered my family has full time jobs-unless we had nothing better to do :livid:


If you lived in the unit for the entire time there is no capital gains (principal residence). And if the reserve fund turned out to be insufficient I would sell


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## kenvin100 (Oct 4, 2015)

Well it appears the reserve fund is in the positive but there are two difference opening balances. One is for shared facilities (approx 900k) and another is for high-rise and town homes (approx $1.4M). This condo is located in Scarborough for those who asked. Still trying to find expected future expenses. Unfortunately, I'm no Finance major so looking at cash flow tables is foreign to me. short and long terms interest rates are 2 and 5% respectively. annual interest for interest earned in the fun is 4.5%


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## OurBigFatWallet (Jan 20, 2014)

By cash flows, I meant simply the money coming in (ie. rent) compared to the money going out (ie. condo fees, taxes, etc) every month. I'd consider having a condo document reviewer take a closer look if you're unsure. There are people who review condo docs for potential buyers to see whether they are good, bad or ugly, and they'd give you a better idea what state the condo is in financially. But even then if you've lived in it all these years (tax free - principal residence), you don't want the work that comes with being a landlord, and the market is half decent in the area I would definitely sell.


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## GreatLaker (Mar 23, 2014)

kenvin100 said:


> Well it appears the reserve fund is in the positive but there are two difference opening balances. One is for shared facilities (approx 900k) and another is for high-rise and town homes (approx $1.4M). This condo is located in Scarborough for those who asked. Still trying to find expected future expenses. Unfortunately, I'm no Finance major so looking at cash flow tables is foreign to me. short and long terms interest rates are 2 and 5% respectively. annual interest for interest earned in the fun is 4.5%


Shared facilities would refer to common elements that are shared between multiple condo corporations. Is it a complex of multiple buildings that share facilities and amenities like parking garage, pool, party room etc?

Also when you use the term "opening balance" it makes me think you are looking at the reserve study, not the actual reserve balance at this time. 

ask for the actual reserve fund balance as of the end of the last month, and compare that to the opening balance listed on the cash flow table. If the actual current balance is lower than the opening balance in the cash flow table then there is a funding gap vs. where it should be
In the cash flow table there should be a column called Estimated Inflation Adjusted Expenditures. That is the expected future expenses
The property manager should also be able to provide a more detailed table, with a list by year of every expected expense, and an itemized description of those projected expenses.
What you really need to look for is a reserve study that is no more than 3 years old, done by an engineering company (required by condo act), compare the actual balance to the projected balance from the cash flow table
Also look at the operating budget and see that there is no large deficit to the actuals YTD (although if there were it should be noted on the status certificate)

But as others have said, if you don't want the effort and hassles of being a landlord why bother keeping it?


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## chriswright (Sep 29, 2015)

Yeah! I agree



GreatLaker said:


> Shared facilities would refer to common elements that are shared between multiple condo corporations. Is it a complex of multiple buildings that share facilities and amenities like parking garage, pool, party room etc?
> 
> Also when you use the term "opening balance" it makes me think you are looking at the reserve study, not the actual reserve balance at this time.
> 
> ...


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## Just a Guy (Mar 27, 2012)

Reserve fund studies, like mechanic's inspections, should be taken with a grain of salt. I've read hundreds over the years, and most are nearly identical...the building is in need of massive amounts of repairs and the reserve fund is underfunded.

This is usually because the "engineering company" does only a cursory look at the property and compares to "as new". Often, they don't have any idea of the actual work done, and assume complete failure at "end of life". They don't account for maintenance which could extend the life, nor the quality of work or materials. Some things fail faster than expected, others last longer in reality. I've seen new constructions which, because of their age, would pass a reserve study yet are poorly build and already starting to fail and I've seen older buildings, which have a massive list of "needed repairs", also due to their age not the actual shape of the building, which are more solid than the new construction.

All that aside, personally, I would probably never rent a place I used to own for a few years. I've seen too many tenants who've trashed places. It would be worse if I had pleasant memories of that place before the damage was done. One of the keys to being a good landlord is keeping your emotions out of the business. Having memories makes that tough, planning on moving back in possibly would make it even tougher. 

No matter how good you think your tenants are going to be, I can guarantee you that you'll be disappointed. No one will ever take as much care of a place that isn't theirs. 

The other thing you haven't stated is the actual numbers you are using to make your decision. What is the place worth, what is your costs (are you accounting for everything taxes, condo fees, insurance, mortgage, etc) and is it actually a good investment. Usually a place you live in doesn't convert into a good investment property. Often it would be better to sell and buy a proper investment property. 

Final thing to consider, how will you handle the long distance management of the tenant? How will you enforce rent collection, deal with repairs, deal with complaints from neighbours, inspect the property (insurance requirement), etc?


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## Davis (Nov 11, 2014)

Just a Guy and I have crossed swords on a number of issues here, but his comments above on being a landlord are very on-point. I have less experience than he does at being a landlord. I wish that I had had that advice when I was starting out. You would do well to follow it.


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## kenvin100 (Oct 4, 2015)

Thanks everyone for the great points. After considering our options, we decided to sell the condo after all as do have a seller. The fact that we pulled off a higher price without an agent makes the financial gain even better (purchased in 1994 for 145k and now selling for 315k). To be honest, we toyed with the idea of renting as it took a week for the status certificate to arrive. The rental offers weren't great for 3 bedrooms and two parking spots as we were looking at $1700/month but were only getting offers of $1500/month. In addition, we have ZERO experience in terms of renting so I can imagine the potential obstacles and hurdles that will get in the way.

Reality is, all members of my family have full time jobs and like how many have said, our emotions may end up getting in the way in terms of renting, especially after living here for more than 20 years. The purpose of renting the condo is for the slim chance we would return-IF we were unhappy living in a new build home but quite frankly, I don't see myself moving back, let alone with my parents 

As stated, our motivation to leave was due to management fears and unless we sell the condo, those fears will still exist if we became landlords of a property. Regardless how good shape their reserve fund is, condo real-estate for older buildings is definitely tough to assess as it can get unpredictable in terms of fees. For example, I knew some good friends who lived in a newer condo (approx 10 years) and they saw a sudden spike in condo fees-forcing them to move out. 

Just wanted to thank everyone for their contributions as I know this thread brought out good discussion for other users in the same dilemma.


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## Berubeland (Sep 6, 2009)

I came late to this thread, but I agree with your decision to sell, the rents and risk of renting don't really even out with selling at what could be close to the top of the market. This coupled with starting a new business of being a landlord, a job that it doesn't seem like any one wants. So all things considered good ending.


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