Are you an investor caught in a dilemma due to soaring interest rates? Whether you're looking to sell your property with a tenant or seize a below-market deal, this blog post and accompanying video have got you covered.
Introduction
In this article, we're sharing a real investor story that delves into the experiences of both the selling and buying investor. If you enjoy these insights, be sure to like, subscribe, and ring that notification bell for more real-world investor stories.
Challenge #1: Tenanted Unit
One of the most common challenges investor sellers face is trying to sell a property with a tenant in residence. This can be tricky because there's no guarantee the unit will be in showcase condition for potential buyers. Tenants may have their own schedules and might not be willing to accommodate showings. Competing with a vacant, well-staged unit can pose a significant challenge.
However, the good news is that if you're lucky, like in our case, your tenant may keep the unit in fantastic condition, almost like a professionally staged space. With some well-photographed images, you can address this challenge effectively.
Challenge #2: Lease Term & Rent
Your current lease term and the rent you're collecting play a crucial role in targeting potential buyers. The lease term and rent amount will determine if you can target end-user buyers or investors.
For instance, if you have a month-to-month lease with your tenant, you can serve notice and ask them to vacate in 60 days, although you'll need to compensate them with one month's rent. However, if you have a one-year fixed lease, the tenant's willingness to terminate it early is usually dependent on whether the market rent is significantly higher. Offering additional compensation, such as two months' rent, can be a solution but often has a low success rate.
Investor buyers will have to assume the current lease, including the rent. The rent amount can make or break the deal, with the best-case scenario being market rent with no rent control. The worst-case? A rent below market value, rent control in place, and a one-year lease. In this situation, you may have to wait for the lease to expire, renew on a month-to-month basis, and then target end-user buyers.
Challenge #3: The Selling Price
Selling a unit in great condition with market rent can still be a challenge in a market where only 1 in 4 condo units in downtown Toronto is selling. We put our unit on the MLS at a price from six months ago but got fewer showings than expected.
Ultimately, we received two types of offers: one trying to slash the price by 30%, which wasn't feasible, and the other from investors with extra cash on hand ready to get a small mortgage. They were willing to pay slightly below market value, recognizing the opportunity for future gains.
Conclusion
The real estate market is challenging, especially for sellers in today's climate. If you don't have to sell, it might be best to wait. However, if selling is a must, understanding your situation and being realistic about the price is essential.
For buyers, this market presents unique opportunities. Crisis often breeds opportunity, and this is no exception. Don't miss out on great deals - subscribe to our "Deal of the Week" emails linked below.
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