# Selling home to rent apartment...dumb idea?



## Sixth_Circle (Nov 22, 2010)

I keep spinning the numbers and can't quite figure this out. Would LOVE some expert advice and opinions. Please bear with me as I try to talk this through, both pro and con, and try to resolve my hangups 

As I've mentioned in other threads, my wife and I currently live in a suburban single family home but feel the "condo" type lifestyle closer to town is a better fit for us. Thus, the prospect of selling and moving into an apartment as renters (no desire to purchase a condo).

However, the type of places we are interested in (after viewing a few) are priced a bit high compared to our monthly mortgage. We can get a 2-3 bedroom, 2 bath, 1400-1600 sq/ft place for approx $1200-1400/month, including heat, hw, and the usual fare (these are professionally managed "luxury" condo-style apartments). Our current mortgage payment is less than $900/month before utilities, expenses, insurance, etc, with 1 year left on our variable rate contract.

If we sell, we could likely walk with approx $120-130K after commissions/closing costs and mortgage repayment fees. We would slice off a chunk to top up retirement accounts and stash the rest for growth somewhere.

Looking at the numbers, it seems we are paying a lot less to live in a home. However, there is also the cost of time and money spent maintaining the place. We hate lawn work, hate shoveling, and would like a place that's easier to clean, more secure for travel, etc. With a house there are several small-medium costs that add up over the long haul.

So it seems an apartment costs more from a dollars perspective but gives us a better lifestyle, but the house is a cheaper place to live, so long as nothing major happens. We've already replaced the shingles and renovated a few rooms, but there are still hardwood floors, a new patio, and a kitchen counter/tiled floor remodel down the road.

If we stashed, say $100,000 in a 1.5 yr GIC, we could get almost $3400 back, which would help to balance out the difference in extra monthly rental expenses. The remaining difference could be recouped as time and convenience and maybe cheaper fuel costs due to less commuting.

Basically, is it worth it? As the market "cools" and in many areas corrects, I don't expect equity to climb much for the next few years. In fact, it has decreased from a couple years ago, and most folks have had to price cut before getting offers. 

Are we wise to bite off a bigger monthly payment in exchange for time, convenience, and a hopefully more suitable location and lifestyle? We can always buy back in again after a year or so, if need be. We actually plan to move to Ont within the next 1-2 years anyway so renting might free us up to move more easily. Thanks for listening as I toss and turn...again!


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## Rico (Jan 27, 2011)

Put this under "opinion" and not "expert advice". 

One benefit of renting is you can try out this lifestyle/location with only the commitment given in the lease you sign. If the extra time/effort/money not spent on house maintenance goes toward rent, why not do it?

I'd figure out just your interest costs on your mortgage, plus property taxes, any utilities the condo rent doesn't include, and compare that way. Then you'll really know how much "extra" no maintenance and preferred location is costing you. If you can live with that number, again, why not do it?


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## iherald (Apr 18, 2009)

It seems to be that there is a $300 difference between your mortgage payment and your 'rent'. But, you say that the rent includes hot water and heat. How much do you pay for that now? $100 a month (averaged out over the year)?

So now it's $200 difference. You also pay property taxes, what do you pay for those? At $1200 a year (super cheap), that means the price difference is $100 a month.

And on and on. There are a lot of extra costs in home ownership that you don't have for an apartment. If it were me, and my lifestyle would be better if I rented, and the cost is pretty much a wash, I would certainly rent. 

Life is too short.


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## Sixth_Circle (Nov 22, 2010)

Our mortgage payment has property taxes built in (approx $2400/yr). It's hard to figure out the exact heating and hot water costs as our home is electric heat and the cost ends up in our monthly power bill, which ranges from $200-400 on avg. Not sure how much electrical bills would be for an apt, minus the heat and hw.

We also purchase wood pellets for our stove each winter, which costs approx $250. Our exposed aggregate driveway also needs resealing every 2 years, which costs $350-$450. Not huge costs, but they all add up. Just to have a Sears guy look at my hot water heater cost almost $100.

My gut tells me we're better off dumping the house while we can still get a half decent price. Starts for apartment buildings are up and starts for SFHs are down, so I don't think we're the only ones contemplating this type of move.


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## Wealthy1Day (Aug 30, 2009)

This really is a no brainer for me... move to and rent the apartment that you'd clearly much rather live in that is also closer to work and the area of the city that you prefer to live/play in. I've come to that conclusion based on the higher rental cost of $1,400.

For an $500, I would chose the lifestyle I want. I'm not downplaying the value of $500. That is a significant sum each month. But provided that you can afford it (and that needs to be the underlying assumption here), it then becomes nominal if you and your wife are going to be happier.

Once you factor in less fuel and utilities plus your investment return potential, I think you'll find it a no brainer by anyone's standards (forget mine) and that's prior to even considering the value of your time. There, done, I think. 

One last thing, more time on your hands may result in spending more money leisurely. Not necessarily a bad thing. Just be aware, that's all.

Good luck!


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## financialnoob (Feb 26, 2011)

I don't think you really need any advice so much as encouragement to go for it. You know your situation better than us and you've clearly spent a considerable amount of time comprehensively covering it.

I would only add that the freedom to move to Ontario on your terms is well worth the cost difference, and also the cost difference can easily be justified if you think the housing market is going to go down, which it sounds like you're convinced of. In that scenario, selling for more can justify the higher monthly cost for a few years.


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## Berubeland (Sep 6, 2009)

I wouldn't move to a property I didn't own if I had any other choice. 

Crazy Landlords 
Landlords who sell the property from under you and you have to move

That's why, when it's your place you say... when it's your landlord's place they say. 

Condos built after 1994 are not subject to rent control guidelines. So your landlord can actually raise the rent as much as they like.


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## Sixth_Circle (Nov 22, 2010)

Here in the Halifax area they are building several "condo-style" apartment buildings, most likely to capitalize on the considerable boomer market making the transition to downsized and/or simpler living. According to a recent CMHC report, single family housing starts are down but multiple dwelling construction is heading up.

We were not interested in the "generic" type of apartment, i.e well-lived in, old crusty appliances, grungy carpets, moldy tub and tile, coin-operated laundry rooms, etc. We also ruled out renting a condo from a owner or spec buyer due to the reasons you mention above. Some landlords are crazy, useless, or suddenly decide to move their cousin from Poland into your suite. We wanted some measure of class and stability to make the transition from our comfy home more tolerable.

The buildings we looked at were all professionally managed and marketed as luxury suites. They have in-suite laundry rooms, high-end finishes, and many feature granite counters and stainless steel appliances. From what we've seen during our search they are interested in attracting and retaining stable, responsible, and "mature" tenants. 

We recently filed an application for one of these suites and look forward to passing our home to a new owner. If things change and we decide to buy back in after our yearly lease expires, at least our down payment will be ready after cooking and gaining some interest. There were a lot of variables factored into our decision to go ahead and do this, none of which we took lightly. We know this will be a huge adjustment, especially as far as my home theater setup and Les Paul is concerned 

And hey, if condo life sucks and we find that a detached house is actually better suited for us, we will just buy another one. Hopefully a bit (or a lot) cheaper than they are right now!


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## financialnoob (Feb 26, 2011)

Berubeland said:


> I wouldn't move to a property I didn't own if I had any other choice.
> 
> Crazy Landlords
> Landlords who sell the property from under you and you have to move
> ...


Are you sure about that last line, and are we talking about Ontario? As far as I know, condo rentals do fall under the Residential Tenancies Act in most circumstances (unless the owner also lives there and it's a roommate-type agreement), and as such, rent increase guidelines are in place.

Rent control used to govern the maximum of what landlords could charge tenants for a specific apartment, and that was abolished around 1994 allowing all landlords to set whatever starting price they wanted on a vacant spot. But they were still obliged to follow rent increase guidelines.


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## Sixth_Circle (Nov 22, 2010)

financialnoob said:


> ...the freedom to move to Ontario on your terms is well worth the cost difference, and also the cost difference can easily be justified if you think the housing market is going to go down, which it sounds like you're convinced of. In that scenario, selling for more can justify the higher monthly cost for a few years.


We have a local website (viewpoint.ca) that allows you to view the entire province divided by lots and properties. Properties for sale are color-coded: blue means for sale, red means sold. You can click the property to view the MLS cutsheet including photos, aerial shots, street view, the works. You can see the listing history, including any recent sales, price drops, expired offers, and the current tax assessment. If a property has sold, you can see the final sale price and the agents who repped the buyers and purchasers. 

At first realtors were in an uproar as customers now had access to more information but now they are rushing to place their ads on it 

In almost every property I've checked, the final sale price was lower than the initial asking price. Sometimes much lower. Many properties had several price reductions during the course of the listing. We have entire neighborhoods in some of the suburbs sitting vacant with $320,000 executive splits. They've been sitting for hundreds of days. It's a sea of blue on their map.

One of the things I'll be looking for as we start to consult with some agents is whether or not they are being realistic about the correction or are going to try the "rock star" approach and blow sunshine up my a**.


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## LondonHomes (Dec 29, 2010)

What it doesn't seem your explicitly factoring in is the cost of living downtown vs living in the suburbs. Housing costs less in the suburbs but it's offset by increased commute costs & commute time.

I think that your proper comparision is how much money you will save by renting down town vs buying town, realizing that it just costs more to live downtown.

Personally if you are happy to spend an extra $500 / month to live downtown then I say go for it, there are probably a lot of worst things you could spend it on.

The only draw back to not owning is that you could find it very expensive to ever buy again if the real estate market dramaticially increased.


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## Sixth_Circle (Nov 22, 2010)

LondonHomes said:


> What it doesn't seem your explicitly factoring in is the cost of living downtown vs living in the suburbs. Housing costs less in the suburbs but it's offset by increased commute costs & commute time.


I work from home; wife drives to work 15-20 min away. We're not quite downtown, just much closer to where we work, shop, and play. So travel time will be reduced considerably.



> Personally if you are happy to spend an extra $500 / month to live downtown then I say go for it, there are probably a lot of worst things you could spend it on.


It actually won't be that much, more like $200-$300, but it wasn't easy to do a side-by-side dollars-to-dollars comparison. Lots of variables. On paper it appears to cost less for our mortgage but over the long term it has cost (and will cost) much more to actually maintain the property. We also value our time and security. And location.



> The only draw back to not owning is that you could find it very expensive to ever buy again if the real estate market dramaticially increased.


This is Halifax. Can't see that happening anytime soon...


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## LondonHomes (Dec 29, 2010)

Sixth_Circle said:


> It actually won't be that much, more like $200-$300, but it wasn't easy to do a side-by-side dollars-to-dollars comparison. Lots of variables. On paper it appears to cost less for our mortgage but over the long term it has cost (and will cost) much more to actually maintain the property. We also value our time and security. And location.


Well it's time to stick a for sale sign in your front yard.


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## hboy43 (May 10, 2009)

Hi:

I've been a homeowner for 26 years. The longer I live, the more sense renting makes. Owning RE is a low return, high PITA, high risk speculation.

Having recently left (for good) the landlord business, I can assure you that if I ever had a premium no hastle tenant, I would not have been in any hurry to try to get a few percentage points more rent. If the tenant ever called my bluff and left, it would likely be a two month disruption and another roll of the dice. So I don't put much stock into the landlord can boot you out arguement against renting. If you are behaving, any sensible landlord will leave you be.

Good luck with your decsison.

hboy43


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## Sixth_Circle (Nov 22, 2010)

When we first bought the house we were thinking of it more as an investment. But now we see it more as a lifestyle choice, as an earlier poster mentioned. Houses are great if you are raising a family, enjoy the yard chores, and have a lifestyle that lends itself well to growing deep roots. 

For folks like us, who like to get up first thing Sat morning and go for breakfast then take a road trip or an overnighter, who don't get into decorating the house during holidays, who dread the yard chores and put them off as long as possible (within reason, we keep a neat property!), and who also want the option to move quickly should the need or opportunity arise, then renting is a legitimate option.

Our home/apartment is simply a place where we eat, sleep, and relax. A shelter. It is not what defines us as people and we no longer want to own a house just to accommodate more "stuff". It's still a tough mental transition as we try to downsize and simplify but we're getting there..


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## Ireton (Sep 21, 2010)

How much do you suppose you could you rent the house for?

Provided you're willing to do the work of being a landlord, you could live in the apartment where you want, retain the asset and build more equity, and save spending 5% on realty fees.

Clearly, you have your concerns about a potential housing correction and an increase in interest rates, and those are things to consider in this scenario as well.


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## Sixth_Circle (Nov 22, 2010)

We did consider renting it out but finally decided against it. I'm no handyman and not sure I'm interested in dealing with tenants. And we figured we could also retain and grow the equity by converting it to cash and investing in a well-diversified portfolio. To us, that's no riskier than having it all invested in a single real estate asset.

Of course, we will take a hit on the 5% plus additional closing costs and the "penalty" cost of paying off our mortgage early (less than $500 - confirmed with lender). So it will take some time to recoup those losses, but we still have over 20 years left until retirement. 

Plus, we might decide to relocate to Ont down the road, so unloading is still the best option for our situation. Being homeowners has been great but now our lifestyle is changing. We are very attracted to the idea of increased freedom and liquidity.


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## Sixth_Circle (Nov 22, 2010)

For better or worse we sold the house. Took 10 days and approx half a dozen viewings. Had two offers, accepted full asking price. 

No going back now! 

It's funny - most of our friends aren't surprised and think we are definitely "apartment-types". Guess we'll find out soon enough...

We've also secured the services of an IA to manage the remaining proceeds (after everyone else gets their taste and we've topped up our self-directed RRSPs and TFSAs). Keep it someplace where it can grow more than a locked-in GIC but still remain fairly liquid in case we buy back in someday. We know that will entail at least a moderate risk but hope the investment diversity will help keep things balanced.


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## financialnoob (Feb 26, 2011)

Congrats on selling the place and getting full asking price too.


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