Are you ready to move out of your condo? If it’s time for your next step, you may be facing a common dilemma. Should you sell your unit, or rent it out as a source of passive income? The answer will depend on several factors, including (but not limited to) your financial stability, risk tolerance, long-term goals, and capacity to take on new responsibilities.
If you’re not sure whether to sell or lease your condo, here are a few key things to consider…
The financial benefits
For most condo owners who are deciding whether to sell or lease, the decision is financial. To start with, your real estate agent can help you determine how much you stand to gain if you put your unit on the market. Assessing the potential profitability of leasing it will take a bit more effort, but it’s worthwhile if you want to make the smartest decision possible.
When it comes to renting out your unit, comprehending cash flow is key. In the simplest terms, this is how investors understand the money they’ll be taking in (through rent, parking, and other streams of income) versus their ongoing expenses (such as mortgage payments and property taxes).
When a unit brings in more money each month than you pay in carrying costs, it’s said to be cash-flow positive. If your condo doesn’t meet this criterion, holding onto it may still be financially beneficial. Your agent can help you assess your situation and decide.
The rental market
One of the most significant factors in whether you decide to lease your condo should be the local market. Current conditions will determine how much rent you can reasonably charge, and how quickly you’re likely to find a qualified tenant.
When the rental market is tight, demand for units and (consequently) average rents tend to be high. Your agent can help you determine exactly how much you stand to gain by looking at what landlords are charging for condos like yours in the area.
Those who are unsure about leasing should also look at whether they’re in a seller’s market. If you are, you’re more likely to find a buyer who’s willing to pay top dollar (and even attract multiple offers). Historically speaking, the Toronto market offers strong appreciation rates and high demand for condos, which can make holding onto your unit a wise decision.
Of course, there are times when selling makes more sense than leasing—regardless of market factors. One of the most important things to keep in mind is whether you’re well-positioned to be a landlord.
Your capacity to lease
If you’re considering renting out your condo, you should be aware of the significant responsibilities involved. Being a landlord means screening tenants, handling security deposits, ensuring that bills are paid, taking care of ongoing maintenance and repairs, and more. These demands can make the job more challenging and time-consuming than many condo owners believe.
Before deciding to rent out your space, review your potential obligations as laid out in the to Residential Tenancies Act. In addition to meeting these basic requirements, those who take on the role should be prepared for worst-case scenarios. Say a tenant skips out on rent, or a major repair that isn’t covered by your condo corporation arises. You could incur some major, unexpected costs.
If you’re ready to embrace the benefits of being a landlord, make sure you have a sizeable contingency fund set up. You should also think carefully about the day-to-day logistics—and decide whether working with a property manager is right for you. A real estate agent with investment condo expertise can help at every step.
For over 35 years, our clients have trusted us to minimize risk, offer unbiased opinions, and ensure their best interests are served. Contact us today to talk about your needs, by emailing us at firstname.lastname@example.org or calling us at 416-441-2888 ext. 772.