We need to move. Our tiny Toronto row house is getting smaller by the day as our kids get older and take up more space. Plus we both work at home, sharing a tiny office: boy, is that hard on a marriage. A bigger house with a little extra space to grow sure would be nice.
But we’re also wondering whether it’s worthwhile to buy a new house and hang on to our old place as a rental. Sure, we’d be carrying two mortgages and a lot more debt, but we’d also have an extra asset to fall back on in the years to come.
To figure out whether this is the right move for us, we’ve been asking ourselves these big questions:
- How much can we rent our place for? We’ve been doing research in the neighbourhood to find out how much comparable places rent for. We’ve asked around – our neighbour rents her place, for example, and she was open about how much she pays. Sites like Craigslist and Kijiji are also good sources to find out what other places rent for in your hood.
- How much would it cost to maintain? We’re adding up what we think it will cost to carry our property on a monthly basis, including mortgage payments, insurance, taxes, maintenance etc.
- Can we handle surprises? Bad tenants, bounced rent cheques and damage are just a few unpleasant realities landlords have to deal with sometimes – it’s something we both need to be prepared for with a nice fat emergency fund.
- Are we comfortable with the risk? The real estate market has been on a tear here in Toronto, there’s a lot of economic uncertainty in Canada right now. There’s a chance property prices could tank and we could end up holding mortgages worth more than our properties are worth. It’s not a big risk if we’re ready and able to hold on until the market improves. But if we end up needing to sell in a bad market, we could lose a lot of money. We need to make sure we don’t put all of our money into real estate.
- Do we really want to be landlords? I’ve had some crazy landlords in my life – and I certainly never thought of myself as the landlord type. But my husband and I are both entrepreneurs – we’re used to managing clients’ needs and staying calm through pretty much any situation. The thing is, our clients don’t call in the middle of the night – and they’re generally a reasonable bunch. Tenants can be a mixed bag – and if a pipe bursts at three in the morning, you’re the one that has to deal with it.
We’re still not sure what we’ll do – but I’ll keep you posted. In the meantime, if you’ve ever been a landlord feel free to share your experiences below (good and bad!).