Rent or sell? Find out which is best for you

In­vest­ment homes can be good source of ex­tra cash

Toronto Star - - MORTGAGES - TANYA EN­BERG

You meet some­one, fall in love and be­fore long, you’re talk­ing prop­erty.

If you both own a home, you may find your­self ask­ing: What should be done with a spare house?

My hus­band and I faced this ques­tion when we de­cided to pur­chase a home to­gether.

I al­ready owned a house I was emo­tion­ally at­tached to, though it didn’t of­fer the space we needed.

We de­bated pitch­ing a “For Sale” sign on the lawn, but ul­ti­mately turned it into a rental.

Whether you wish to list or gen­er­ate ex­tra in­come, both carry pros and cons, says sales rep Bren­dan Pow­ell with the Brel Team.

“If you can af­ford to hold the prop­erty and own your pri­mary res­i­dence, then you can po­ten­tially ben­e­fit from the gain in value over time,” says Pow­ell.

“What bet­ter way to have con­trol over that part of your in­vest­ments than man­ag­ing your own prop­erty?”

On the flip side, “sell­ing your prop­erty locks in what­ever re­turn you’ve made since you bought and frees that cash up for you to use some­where else.”

“Real es­tate al­lows you to buy an as­set with­out pay­ing the full price, via a mort­gage. It’s hard to find that with other in­vest­ments.” MATHIEU YUILL REAL ES­TATE IN­VESTOR

Cer­tainly hold­ing prop­erty sounds ap­peal­ing, but man­ag­ing it can get gritty. When Bow­manville-based Lesley Ro­drigues met her hus­band, she was rent­ing out her Pick­er­ing townhouse.

“When my ten­ant de­cided to leave, we moved into it to­gether,” she re­calls. “Af­ter a while, we bought a big­ger place, so I rented the townhouse out again.”

Last year, a bad ten­ant prompted them to sell. Cheques were bounc­ing and the house was get­ting ru­ined.

“The place just looked worse and worse,” says Ro­drigues. “The dog had de­stroyed the lam­i­nate floor­ing as well as the front and back doors.”

Mean­while, she had to re­fin­ish the dam­aged bath­rooms, in­stall new car­pets and re­paint.

Mathieu Yuill, a real es­tate in­vestor since 2004, be­lieves the benefits out­weigh the risks.

“There is a lot you can do to in­crease the value of your prop­erty un­like other in­vest­ments,” he says.

“Real es­tate al­lows you to buy an as­set with­out pay­ing the full price, via a mort­gage,” says Yuill. “It’s hard to find that with other in­vest­ments.”

Still, some might not an­tic­i­pate the work in­volved, in­clud­ing un­ex­pected ten­ant and main­te­nance is­sues.

“Own­ing an in­come prop­erty is a job,” says Pow­ell. “Even the best ten­ants will even­tu­ally leave and it costs time and/or money to find new ones.”

Yuill says a strong land­lord-ten­ant re­la­tion­ship is es­sen­tial for suc­cess.

“A lot a lot of land­lords think they can ‘set it and for­get it,’ ” he says.

“Your ten­ants are go­ing to help you build cash flow, eq­uity and value — you need to treat them well to achieve this.”

SHUTTERSTO­CK

There are pros and cons to con­sider be­fore buy­ing an in­vest­ment prop­erty and rent­ing it out.

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