[rigalio]

I have a big question?

I live in Quebec near Montreal I have a house and I want to leave and go to live on board should I keep the house and make a little money out of it or selling and live on the hook, did anny one went thrue this processe. were I would get the info.

 

[chuck53]

Where are you going to be living on the hook? How long to you plan to live on board?

 

[Greenhand]

We chose to sell. A couple of years of landlording was enough for us, we couldn't imagine doing it from any distance.

However, we still had mortgages on both properties. If you own your property free and clear, you are more likely to have an actual income from it, even if you have to pay a management firm.

 

[TQA]

Selling simplicates your life.

I regularly hear of cruisers having to fly home to deal with some rental crisis.

 

[MarkofSeaLife]

It really depends on the net cash benifit you receive by renting.

I don't know how the tax system on property works in Canada, but I know a fraction about it in the USA and they have a pretty high yearly tax based on the value of the property, even if its not rented out.

In Australia there is a small land tax on property thats rented out.
I have kept my house in Australia and it pays my cruising kitty (whilst appreciating in value)
All my fees and expenses in running the property are tax deductible. So for me its a no brainer. Keep the property and have an income.

Obviously theres difficulties, like last year when the hot water system blew up, the bathroom blocked up, the electricity fried up and the roof fell down. But apart from that its been fine.

Re TQAs point on havinf to fly home occasionally... Yes, but the flights are a tax deduction.


Mark

 

[Skipper Jer]

We were landlords once. Never again. The rent check will be late, you will have renters that damage the property and think its no big deal. You will be surprised at how nasty some people live. Then you can have renters that leave the place better than when they moved in. Oh, did I say you will have to research the eviction process? Got a handy man who you trust? Sell the place, its one less item to worry about.

 

[jwing]

I have had mostly bad experiences with renting houses. I never made any money for myself, but lots of money for the banker, the insurance guy, the taxman, Home Depot, the real estate agent, attorney, and even the private detective I had to hire to deliver eviction notices to rent-nonpayers. Even the good renters I had broke the lease or messed up the house some how, forcing me to drop everything else and tend to the problem.

I might get into the rental business again, but only with properties that are close enough to my home so that I would see them every day. No way would I be an absentee landlord.

 

[Oldboyracer]

I chose to rent my place out , maybe as I am new to living aboard it gave me options as I can always go back . The thought of not having a place on land to go back to if needed just didn't sit that we'll with me . Also to buy another one in maybe 10 years if I sold might be out of my financial range . I live in oz so it might be different over there .

 

[Minnewaska]

Before getting into the landlord discussion, for which I have tons of experience, let's first recognize that the vast majority of live aboard cruisers return to land. That's not the way it seems reading magazines and web forums, but it's clearly true. If you'll have the means to return elsewhere, then selling is an option. If not, you might consider keeping it as a safety net of sorts.

As for being a landlord, you must first detach from any sentimental connection. It's now an investment property. IMO, you must have a local rental/management agent. In my area, they will take one month rent at each lease signing, plus a management fee. Be sure to consider repairs in your budget and a vacancy rate. If it remains cash flow positive, or you can swing the shortfall, it's an option.

I've had reasonable experiences with this approach. I believe the better maintained you keep the rental, the better the tenant will treat it. Give them one excuse that you don't seem to care and they will triple down on it. Still, expect some crazy behavior from what will appear to be normal people that just won't treat your property like it was their own. I also tried to keep my rent a few bucks below market, so I could be more choosey on who I accepted. Better jobs, more likely to remain in the area, etc. I've had tenants that renewed for many years. But, I also had one that called me from Detroit, about 6 months after moving in, and said he left last weekend, isn't coming back and isn't paying.

Be prepared for anything.

 

[Sal Paradise]

Many Canadian sailboats on our docks heading south. I was talking to one Canadian about the dream and he said that you should give up the house because you are always worrying about the house , spending $$ on it and flying back to it.

 

[MarkofSeaLife]

Like most things the figures are out there for you to make a decision based on facts and not some rumour mill:

According to recent data from the Real Estate Institute of New South Wales vacancy rates for rental properties across Sydney during March dipped 0.3% to 1.4%

That means theres so few places to rent agents can select the best tennats only. Therefore the chances of default are very low.

The OP is from Canada so theres figures there too

Canada

Montréal CMA 2.8%

the major centres with the lowest vacancy rates in the primary apartment rental market were Calgary (1.0 per cent), Edmonton (1.4 per cent) and Toronto (1.6 per cent). The centres with the highest vacancy rates were Saint John (11.4 per cent), Moncton (9.1 per cent) and Charlottetown (7.9 per cent).

As for renting to people who default... some investment advice is to buy low end properties and the cash return is higher than premium properties where the rental return is lower but the capital gain is higher.

My belief is premium properties in nice area with good agents get a better tenant... they keep the house better and pay on time.

Going to Minnewaska's point about what you do after cruising... If you have no house, and have no income whilst sailing then what will you be doing when you get home: working? Or living a very quiet life?

 

[crakerjk]

As for being a landlord, you must first detach from any sentimental connection. It's now an investment property.

It really depends on the net cash benifit you receive by renting

Both of these are spot on.

There are a lot of articles on the web related to selling or not. Let me put out an example:

If your house is worth $100,000 and you can sell it and walk away with $40,000 a simple comparison is to look at what you would get if you dropped it in a bank

If you look at conservative investment returns most say around 6%. or $1200/ year. So in order for a rental to be profitable, you need to make at least that per year after expenses.

When determining expenses, it isnt just the bank note and insurance. In my case I subtract from the rent:

10 % Management company
10 % Vacancy rate
5 % Plan for Repairs

In this case to break even, 75% of the rent - loan and insurance = $1200/year from a pure cash point of view. You can facture in equity that builds from renting and appreciation to get a better idea of your true return.

 

[B.J. Porter]

Renting is a pain in the butt. If you can make money by hiring a property manager (which costs about 1 mont's rent/year) that is the only way to do it. Unless you want to deal with the tenant BS, in which case you better not sail too far away.

It can work, but I've had headaches even with a manager.

 

[Omatako]

Good points made above. Here's my take on it.

Firstly, I reckon it depends on where your propertry is and what the property market in that area does. For example, the property market in Auckland is growing at an almost alarming rate, has done so for over 10 years now and the real estate gurus say it is likely to continue. As Minnewaska said, at some point you're going to want to go home and if you have sold your property in this kind of market, there is no way you're going to get back in unless you have some serious cash reserves which is unlikely.

Secondly keeping a property works a whole lot better if the property is paid for (mortgage-free). Then you have positive cash flow that can take care of the maintenance and even damage rehabilitation. It will also cover the cost of insurance and a management company to look after the property and the tenants. If the property is properly maintained by the landlord, tenants are less likely to damage it. And it means that if a tenant bolts, you're not placed into immediately negative cash flow caused by mortgage payments.

In our original cruising plan we agreed that real estate had no place in a crusiers life but that was when we had a mortgage. When we go, we will be mortgage free and consequently our view has changed.

If you are servicing a mortgage, none of the above works and you're probably going to regret having the property.