Deciding on Selling or Renting your second property

With the market in a very fragile position, it is obvious potential Buyers do not have the drive or incentive to make quick decisions, i.e. there are a lot of homes available, they will wait until the "perfect" home comes up, or will wait for prices to adjust further down.

I would suggest that we will see the average prices in Calgary and the area dip further as inventory is extremely high in comparison to what is being sold. Many economists are predicting a further decrease of up to 10% in property value by the end of the year. While looking at my own listings, I can see that phone calls have certainly slowed to a trickle regardless of the area, type of property or price break. There are still sales, they are just fewer and farther between and they need to be worked on diligently through marketing and Realtor to Realtor contact.

If you decide not to sell your second property and opt to rent until the market corrects itself, you need to extensively analyse your plan of action. I would suggest that if you do decide to hold off on the sale of your property you need to make a long term commitment to the "holding property". Many homes will be taken off the market in the next few months and many of these homes will be put into the rental pool. A similar thing happened in 2008 when our inventory was at an all time high. These "rentals" from 2008 are certainly contributing to our abnormally high inventory today. This same issue will raise its ugly head for the next few years as the inadvertent landlords keep bringing their properties to the market to sell.

Other contributing factors to the market such as rising interest rates, stricter policies for first time home buyers and investors, a volatile oil and gas sector and a devastated world economy will also add to our plate. Although it looks like an issue in the next few years, holding property for a longer term typically makes good investment sense. Over the term you will be paying down the debt of the mortgage, a renter will assist you with these payments and you should see long-term growth in value.

Becoming a landlord should be a well thought out process. There are many activities associated with becoming a landlord that you need to consider.... late rent cheques, renters leaving early, damage to your property, regular maintenance, neighbour conflicts, insurance costs, municipal taxes and replacement costs to name a few. Most "Renters" are great people, and they are helping you pay down your mortgage, however, you do need to have a contention plan in the case the unexpected happens. Expect the unexpected!