Toronto - sell rental house and buy condo?

[TightFistedScot]

I'm 31, single, a full-time phd student, and a part-time landlord. I really do not like landlording, but I can't afford my house otherwise. I live in the basement apartment and rent out the main floor apartment.

I bought a 1946 brick war-time house (2 bedroom main floor, with 2 bedroom basement apartment) 2+ years ago in the West end of Toronto. I paid 410k with 20% down and a mortgage (2.97%). I now owe 304k on it. Based on comps in the neighborhood, it would sell today for somewhere between 600-650k. The Toronto market is ridiculous right now; my previous next door neighbor sold her house that is identical to mine but with an unfinished basement a few months ago for 625k. She had 10 bids on it.

The rental income (1600/mnth) pays the monthly mortgage fees, inclusive of property taxes. I pay all the additional utility/insurance bills and maintenance which are around $500 per month. That does not include when bigger projects come up - I got all new eavestroughs last winter, and I think I should start the process of getting some new windows as well.

After a couple sets of not-so-great tenants, I have seriously considered whether I can continue renting for much longer. Current tenants are pretty good overall, but have essentially taken over my property and I often have fantasies of selling the place just so I don't have to deal with them anymore. I think I just don't have the right personality for landlording!

I could buy a 1 or 2 bedroom condo for 300-400k in a better location, save myself the hassle, AND have a really low mortgage at that point. I have approximately 2-3 years left in my phd, which is why I am not earning very much now.

But at the same time, getting into the housing market in Toronto is very difficult for people in my circumstance. I feel like it would be silly to downsize, when so many people in my demographic can't get a detached house either because they don't have the downpayment or they lose to competitive bidding wars.

What are your thoughts?

[Mr. Boh]

I think you should keep your house. If the house is worth what you think it is you should easily be able to raise the rent. Maybe you should live in the upstairs unit. It seems to me that would help with your quality of living since you wouldn't hear the tenants walking  on your ceiling. I also think it's important to establish more firm rules for tenants so they don't take over your life. You would probably have to do these things with the next set of tenants.

I think you might have regrets years from now if you sold your house and bought a condo. A detached house generally appreciates faster than a condo and as the years go by that can add up. Years seem to fly by the older you get and if you just grin and bear your landlord duties, before you know it you'll be done with your studies. At that point perhaps you could rent out both units and buy a condo with your salary and rental earnings.

That's my $.02

[Freedomin5]

If I had a house in TO, I would definitely keep it. Since your area has appreciated so much, you could also consider renting out the downstairs unit and then renting a condo elsewhere for yourself to live in.

If having problem tenants is one of your landlording headaches, then perhaps reading the info on this forum and on Bigger Pockets on how to select good tenants may be helpful.

[plainjane]

Could you put up with it until you're done your PhD and have a job?  Then, when you have the cashflow, maybe taking over the top floor and doing the basement as an airbnb?

[TightFistedScot]

I think you should keep your house. If the house is worth what you think it is you should easily be able to raise the rent. Maybe you should live in the upstairs unit. It seems to me that would help with your quality of living since you wouldn't hear the tenants walking  on your ceiling. I also think it's important to establish more firm rules for tenants so they don't take over your life. You would probably have to do these things with the next set of tenants.

I think you might have regrets years from now if you sold your house and bought a condo. A detached house generally appreciates faster than a condo and as the years go by that can add up. Years seem to fly by the older you get and if you just grin and bear your landlord duties, before you know it you'll be done with your studies. At that point perhaps you could rent out both units and buy a condo with your salary and rental earnings.

That's my $.02

Thanks for your cents. I think you're right. I am irritated every day hearing the walking on ceiling (and am woken up by it every morning, too). But renting upstairs generates an additional $400 per month versus when I rented out the basement.

The current rent I charge is about 100ish less than market rate. And Province sets the rate that rent can be raised the year following the initial rent set by the lease. It varies. This year it is 2%. So I can charge an extra $32.00 each month.

[TightFistedScot]

If I had a house in TO, I would definitely keep it. Since your area has appreciated so much, you could also consider renting out the downstairs unit and then renting a condo elsewhere for yourself to live in.

If having problem tenants is one of your landlording headaches, then perhaps reading the info on this forum and on Bigger Pockets on how to select good tenants may be helpful.

Am actually currently working on this - thanks! I may rent out my basement furnished, and rent myself a furnished place downtown for the Winter to try things out.