# Rental Restriction help



## lisalisa (Jul 11, 2011)

Thanks for taking the time to read this. I’m in a situation with my rental restriction… I bought my condo a few years ago. When I bought it initially, I was planning to live in it for at least 5 years and then buy up to a bigger property and rent it out. Because I wasn’t under any “time restrictions” at the time, I liked having the rental restriction, because it meant that the majority of the residences in my complex are owners and they care about the property. It has been proven that the people in my condo care a lot about our property and we have had no issues with large upkeeps and repairs as we have always planned far ahead so there are no large assessments. 

Fast forward a few years after I purchased my condo. I met my fiancé during a work conference and he lives in Phoenix. We have been doing long distance (going back and forth from Arizona/BC) for the last 2 years. Recently, I got laid off and was able to find work almost immediately, but with a very big paycut (about $22,000). I am doing OK as I am fairly smart financially and don’t often splurge and I have an emergency fund. My paycut still allows me to cover my expenses, but I don’t have as much “free” money to invest or save as I use to. I’ve been, in the last few months, going paycheck to paycheck and only putting a very minimal amount into savings. 

My fiance owns his own home so the move if pretty easy… outside of the visa issue. We were planning on making the move in 2015, but because of my job situation, we started looking at our future a little more seriously. I expressed that it’s been challenging to keep myself afloat these last few months and I have had to really plan my purchases and ensure that I can still put a small bit amount away. I am lucky that I am not going into debt each month like many of the people I’ve seen in our minutes that have requested to rent their units out because of financial distress. 

We’re in limbo because 1) we don’t want to start the visa process in the event I can’t rent out my place. Our lawyers say it will take about 5-7 months for us to get approved and once I am approved, I have 90 days to move to the US and get married. 2) I have clients in the US who have expressed that they’d like to hire me, but would need me to verify my eligibility to work in the US before they bring me on board (very understandable). I can’t get an offer letter until I have my EAD from my K1 Visa. So… under the bylaw of getting an exception based on work will not work. 3) I can’t claim financial distress because I am technically, not in “financial distress”. I am pinched tightly on budget, but I am making my bills on time each and every month. 

I have contacted our property management company and it’s been almost a week with no reply… I’m not too familiar with the bylaw’s and hoping someone can shed some light on how I can approach this situation?


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## andrewf (Mar 1, 2010)

Why not sell?


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## lisalisa (Jul 11, 2011)

It's a good investment in a great area. I'd prefer to keep it as an investment versus selling, if possible.


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## andrewf (Mar 1, 2010)

What's the cap rate, if you were to rent the property? 

Frankly, if you're in financial distress and planning to move to the US in a few months, it is a good idea to sell the property.


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## lisalisa (Jul 11, 2011)

I could rent my unit for $1300-$1500/month which would give me a positive cash flow of $200-$400/month. I’m not in financial distress in the sense that I can’t carry my mortgage plus my bills. I am meeting all due dates and financial obligations just fine… It’s just a matter of putting $1000 into a savings account each month in my previous role and now having less than that to put into savings and into my “fun” account. I am also in a fixed mortgage for a few more years… and currently; I would be selling it at a loss. I put over 20% down, but I wouldn’t make it all back. So I would prefer to keep it.


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## andrewf (Mar 1, 2010)

If it's a good investment, why is it under water?

I'm just challenging your pro-real estate assumptions. If you're planning on moving, I think you should cut your losses and sell. Managing a rental from another country is not easy or cheap. You can probably find more lucrative rental opportunities in Arizona, where cap rates are not as unfavourable as they are in most of Canada.


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## lisalisa (Jul 11, 2011)

It's a good investment in the area (for rental). When I bought it, I didn't buy it at the peak but I didn't buy it super low. When I bought it, I bought it at $340,000. I could probably sell it today at $325,000-$330,000. So not much of a "loss" but still a loss nonetheless. I would prefer to hold it and make a slight profit in a year or two instead of selling it and pretty much hitting even or feel like all I did was pay rent for the last 2 years. But if I can keep it as a rental, I would be able to make a profit versus selling it today and losing out on what I paid in mortgages and potentially taking back less than what I put down. 

What would I do with a fixed mortgage? I have family in Vancouver that I could act as a landlord for me and I would be coming back at least once every 6 weeks (at least for a weekend) to visit my family and my sisters young kids.


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## andrewf (Mar 1, 2010)

So if the place would rent for $1300 - $1500 and is worth $330k today, then it would yield $1300x12 to $1500x12, or $15,600 to $18,000 per year in rental income. That gives you a yield of 4.7 to 5.5%. That's gross return. Knock off condo fees, taxes, insurance, and your net operating income yield would be perhaps 2%, before financing costs. Not great.

Anyway, I think you're more interested in feedback on condo rules/bylaws. I don't have much to add on that subject. Try talking to one of the board members.


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## none (Jan 15, 2013)

Someone should forward this thread to greaterfool. Garth would have a field day. 

Sell now for a small loss or sell later for a bigger one (just based on opportunity costs).


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## lisalisa (Jul 11, 2011)

I factored in the condo fee's in my positive cashflow.


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## jamesbe (May 8, 2010)

Hate to jump on the bandwagon but you are assuming in a few years it will be worth more. Where as it is very possible it could be worth the same or less than now.


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## marina628 (Dec 14, 2010)

jamesbe said:


> Hate to jump on the bandwagon but you are assuming in a few years it will be worth more. Where as it is very possible it could be worth the same or less than now.


I understand you thinking of trying to keep it until the mortgage is up for renewal but beyond that I think keeping it is a horrible idea to keep it while trying to move to another country.When is the mortgage up?What interest rate are you paying now?


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## Potato (Apr 3, 2009)

I also have to agree with the sell crowd: valuation/cap rate issues aside, it's not an investment at all if there are bylaws restricting you from renting it out in the first place. Then the added complications of moving to another country? Ugh, sell it, take the loss now, and start over with your future husband.


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## sharbit (Apr 26, 2012)

do you have an ideal candidate to rent out the place? or are you just planning on posting an add/hiring a rental company?
have you ever been a landlord before?
if the place got damaged and couldn't rent for 2 months would that bother you?

Also, just for fun, what advice would you give this guy

http://canadianmoneyforum.com/showthread.php/15712-Stretching-too-thin


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## the-royal-mail (Dec 11, 2009)

sigh. Why do all the OP's that come here already have their mind made up beforehand?

Personally, I think you should sell the place now and NOT get involved with tenants. You want to have family act as a landlord? Do you realize how much work it is and how much property mgmt services cost? Figure about $250/mo for the latter and for the former, do NOT get friends/family involved in schemes like this. Lastly, when you finally do sell it won't be as easy as you think because the tenants may not want to move. $200 a month in profit is hardly worth all this hassle and all the money you'll be moving around. Get out now and keep your life simple. The ones making money on condos are developers, realtors, bankers, govt and politicians, not the little end buyers.


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## jamesbe (May 8, 2010)

the-royal-mail said:


> snip. The only ones making money on condos are developers, politicians and realtors, not the little end buyers.


Fixed for you.


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## Young&Ambitious (Aug 11, 2010)

I'm with the keep & rent party. Not only does it cashflow positively but your tenant is also paying down the mortgage aka buiding up your equity and networth. Dependant on variables, you should have no problem renting out your condo. I recently rented out my condo in Vancouver (just outside downtown) and the response from my craigslist ad was overwhelming. about 20 responses in less than 1 day of having the ad up. And all except 1 came to check the place out the day of and the following day and just about all of them seemed to be really great prospective tenants. Goodluck


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## none (Jan 15, 2013)

That's a very small party . 

Positive cash flow needs to be considered in the context of a time horizon. This property is just barely cash flow positive and the risk / benefit / hassle of it all makes it sound like its not worth it. 

The property has already gone down in value and many people believe that there is an appreciable probability that prices would decline further with a low probability of prices going up. Once you consider those potential losses with the opportunity cost of money sitting in a condo it sounds like a high risk / low return investment that should get dumped.


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## OhGreatGuru (May 24, 2009)

OP may also want to consider the income tax implications (from IRS) of owning a foreign income property while a resident of the US; the fact that Revenue Canada may still consider her a resident for tax purposes if she owns an income property here; that she will at the very least have to file a CDN tax return on her rental income.
Some headaches aren't worth having, no matter how nice the condo is.

PS: that she will lose the Primary Residence Capital Gains exemption for the period she is not living there.

PPS: IRS will likely tax capital gains if she sells while living in the US.


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## andrewf (Mar 1, 2010)

Selling really is a no brainer. I was trying to be polite.


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## birdman (Feb 12, 2013)

I recommend selling for the reasons mentioned by others. You also eliminate the risk of damage by tenants, unpaid rents legal fees, and special assessments by the Strata Corp.


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## Charlie (May 20, 2011)

I'm confused why you'd buy a place with rental restrictions when your original intention was to rent it out (eventually).

Unless I'm missing something here what you want to do....rent it out....just isn't a realistic option for this condo? Quite apart from what our local real estate bears think about holding real estate in general.


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## Cal (Jun 17, 2009)

I am more curious to know what the plans are to manage the rental. Will you use a RE agent and authorize them to hire any contractors as needed for toilets that don't flush, or is a family member going to handle everything in your absence.


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