# Suggesting people sell...



## Berubeland (Sep 6, 2009)

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.


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## MoneyGal (Apr 24, 2009)

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


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## Four Pillars (Apr 5, 2009)

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).


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## Berubeland (Sep 6, 2009)

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


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## Kim (Jan 10, 2011)

I think you did the right thing.


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## Four Pillars (Apr 5, 2009)

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.


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## MoneyGal (Apr 24, 2009)

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.


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## Square Root (Jan 30, 2010)

Kim said:


> I think you did the right thing.


Yes. They should sell.


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## Charlie (May 20, 2011)

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.


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> 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.


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## Charlie (May 20, 2011)

if that's the standard FP, there are a few brokers and financial advisors I'd like to sue ....


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## Causalien (Apr 4, 2009)

Charlie said:


> if that's the standard FP, there are a few brokers and financial advisors I'd like to sue ....


I can see it making sense, IF, you can be their selling agent as well. Or if you get referral bonus to help them find RE agents that are trustworthy. This is resting upon two branding assumption. That you are a trustworthy enough person during the time you managed their RE and that referrals to RE agents will not bring in enough money to present a conflict of interest where you give bad advice to get more money. A bonus to you only when the unit sold above market value will ensure that you are incentivized to push for selling when it is a seller's market and only when the client's money is seriously at stake would you recommend selling during buyer's market. This is more PR for the client to cement your trustworthiness.


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## Cal (Jun 17, 2009)

If it can't rent and be cash flow positive, and they can sell and make a profit, it's a no brainer to me.

Do you have your RE license Berubeland?


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## Sherlock (Apr 18, 2010)

Berubeland said:


> They were extremely nice people but I was not sure that they would do well with a tenant.


Why not, is there a particular personality trait or quality that makes someone less likely to be successful as a landlord?


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## Berubeland (Sep 6, 2009)

No real estate license here and no referral fees accepted either. No conflict of interests allowed even gift cards get declared and given away.


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## kcowan (Jul 1, 2010)

Hey BL
Did you present a proposal to rent out the place for them?
Did you compare that to their immediate proceeds of sale after all the costs and taxes?
Did you do a what if analysis, as in e.g. they rent it out for 10 years and then sell it under various capital gain scenarios.

If so, then you have given them all that you can. It is up to them to select the best way forward.


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## andrewf (Mar 1, 2010)

It's probably worth the usual 'this should not be construed as financial advice' disclaimer when discussing these matters.


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## londoncalling (Sep 17, 2011)

Four Pillars said:


> 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.


As mentioned, the probability of legal action is quite low. Furthermore, there is more to running a business than just charging fees. If the clients look back in hindsight and think this advice was correct than the amount of "goodwill" will only help the OP's reputation as a trustworthy businessperson that will act in their clients best interest. A good reputation can generate alot of additional revenue. good on ya BL. Chalk it up to karma. As you have said the additional $1000 is less important than your peace of mind and being true to yourself as an individual. IMO the lack of people acting in good conscience is one of the handicaps of our society (both personal and corporate relations). On the other hand there is the possibility that the clients will regret that advice as mentioned if they sell and the market continues on an upward trend there is a good chance they may have regret. The only way for the OP to be seen in the highest regard is for the clients to ignore her advice, fail at being landlords and realize that they should lock in their gain.

Cheers!


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## Four Pillars (Apr 5, 2009)

londoncalling said:


> As mentioned, the probability of legal action is quite low. Furthermore, there is more to running a business than just charging fees. If the clients look back in hindsight and think this advice was correct than the amount of "goodwill" will only help the OP's reputation as a trustworthy businessperson that will act in their clients best interest. A good reputation can generate alot of additional revenue. good on ya BL. Chalk it up to karma. As you have said the additional $1000 is less important than your peace of mind and being true to yourself as an individual. IMO the lack of people acting in good conscience is one of the handicaps of our society (both personal and corporate relations). On the other hand there is the possibility that the clients will regret that advice as mentioned if they sell and the market continues on an upward trend there is a good chance they may have regret. The only way for the OP to be seen in the highest regard is for the clients to ignore her advice, fail at being landlords and realize that they should lock in their gain.
> 
> Cheers!


I hear what you are saying, but I think it's pretty easy to go bankrupt by helping people. You can't save the whole world.

/bitterness


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## Causalien (Apr 4, 2009)

/adulthood


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## canadianbanks (Jun 5, 2009)

Berubeland said:


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


I think you gave them the right advice and they'll be smart to listen to you. If they don't you get the listing and the satisfaction that you tried to help them with an honest advice.


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## donald (Apr 18, 2011)

I'm not sure i "understand"?If they were hiring you to landloard the place out(and you have the skills,abilities & expierence)That is all that matters?Just curious "why" the client's means or triats have anything to do with it?If they sign a agreement with you(for your professional fee)you go to work for them and they are handing it over to you...and you make it work because that is why you are hired?You make it a win for you and a win for them?...what does the sons lack of "triats" have anything to do with it.....Its about the condo?Isn't it?....That is how i would view it-unless you can't make it cashflow positive.


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## marina628 (Dec 14, 2010)

If they were stuck into the situation I bet Rachelle would have high maintenance clients plus god knows what with the tenant.Very difficult to find cash positive condos these days , They are lucky they made some money on this deal and hopefully they wont rush to buy another place with their son.


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## Berubeland (Sep 6, 2009)

Ok well I have one guy who has 5 non cash flowing condos and I don't mind because in his situation with his expectations it makes perfect sense. He's quite wealthy and wants to be able to pay them off and then have indexed retirement income. He bought new. Don't forget that when you buy new you have very little maintenance as well compared to an older building/suite and your negative cash flow is offset by the lack of expenditures on maintenance on an older building/suite. 

These happen to be accidental landlords and from their building you can see about 4 cranes. Unlike the other landlord above they don't have the resources to deal with any vacancy and a bad tenant. Plus it's an investment for their son. I seriously doubt they'll enjoy the same kind of gains they have until now. 

Plus and this is a little hard to define so bear with me. Most landlords are entrepreneurial in nature. They want to take a risk and invest in property. These people were too nice and to be a landlord you need to have a little mean in you. In fact to be in any business you need some steel. They seemed a little confused that this had happened and were renting...


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## marina628 (Dec 14, 2010)

Thanks for calling us meanies lol .I understand what you mean though and having adequate resources is important when taking on a rental property.


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## andrewf (Mar 1, 2010)

I question condos as indexed income. As condos age, the maintenance fees skyrocket, so the real cashflow from the property is not certain to increase.


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## Spidey (May 11, 2009)

I sympathize because I also have the tendency to give advice but I'm learning to resist unless directly asked. What if the condo rises another $100,000 in value over the next couple of years after they've sold? They may not be too happy. At most I would remind them that its one of the options but I wouldn't offer any advice.


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## donaldmc (Feb 27, 2012)

I oh well, it's really better to sell it.


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## marina628 (Dec 14, 2010)

I do not like condos as investment because of the wild card aka condo fees.


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## Cal (Jun 17, 2009)

^ Same. That condo fee is income I could be putting down on the debt. My other issue is that with a condo you basically have no control over how repairs are done, what rate is paid, what type of repairs is done when there are a few options.


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## Just a Guy (Mar 27, 2012)

I agree it wouldn't cash flow looking at the rough numbers. If they really wanted to be landlords, or invest in real estate, which they don't seem to want, I'd suggest selling it and buying appropriate places that would make money.

The one downfall with selling, is it gets rid of a forced savings plan.


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