Our tenants gave notice – Now what?

This month, Brian and I received the news that our tenants (of almost three years!) were giving notice to move out at the end of April.  We kind of thought that this might happen.  We knew they eventually wanted a bigger place and they both make more than enough money to do so.  But it still sucks to get the news.  However, we have planned ahead!  As a result, we’re not too worried.

Photo Credit: Jennifer C. via Flickr

Photo Credit: Jennifer C. via Flickr

Our contingency plan spans several months.  For month 1, we are planning on using our condo maintenance fund to pay the mortgage and fees.  This is a fund that we’ve been contributing $20-$40 a month towards for the past few years.  We used it for minor repairs and as a condo-specific emergency fund.  There’s enough money in it to cover the mortgage and fees for May.

Meanwhile, we will look into renting or selling the condo.  We’ve already contacted our realtor and we hope to hear back from her this week.  Once we get an idea of our potential selling price, we’ll decide whether we want to sell it immediately or hold on to it as a rental for another year or two.

Assuming we do not manage to sell or rent the unit by the end of May, our month 2 contingency plan is to use our TD “skip a payment” feature to (duh) skip a mortgage payment.  This gives us another month to sell or rent the unit, and we keep our cash flow free in case we need to stage the unit or make minor improvements.  Hopefully it won’t come to this, but if it does, we have this option available!

And finally – what if things go WRONG?

In the 3rd-to-worst case scenario, Brian and I would be unable to sell OR rent the condo.  Well, then we’d have to move back into the condo and rent out our current condo!  I’ve done some (slightly unethical) market testing and we would be able to rent our current unit for the cost of the mortgage.

In the 2nd-to-worst case scenario, Brian and I would be unable to sell OR rent the condo AND we would be unable or unwilling to move back into it while renting out the current condo.  Could happen – we love our current location, after all.  In this case, we are able to cover the cost of the mortgage indefinitely simply by readjusting our budget.  True, it is not ideal because we’d have to reduce our savings and spending, but it is still do-able.

And last but not least, my worst-case-scenario has either me or Brian losing our job and being without income indefinitely.  It is not likely to happen and I imagine that even if it did, both Brian and I are sensible enough to pick up ANY work in order to make money for bills.  However, if it did happen, we each make enough on our own to pay for both mortgages and the bills, provided we cut all unnecessary expenses and spending.  It would suck monkey balls, but again, still do-able.

Any other landlords out there with emergency-emergency plans?  Anyone looking for a Vancouver condo???  :)

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30 Comments

  1. Not sure what the rent is but Cait from Blonde on a Budget is looking for a place in Vancouver. http://blondeonabudget.ca/ Good luck with filling the place!

  2. Debt RoundUp says:

    I like how you have this all planned out. That is a sign of a person that understands that things happen. I like it and I hope you are able to either rent it or sell it soon.

    • CF says:

      I figure if you give it enough time, *something* bad is bound to happen. :p If you plan for it, it’s not nearly so stressful when it comes.

  3. One thing that scares me about renting is the in and out of renters. I do however like how you have all these worse case scenarios in place. I’m betting there are lots of people out there that are landlords and would be stuffed if they didn’t rent a vacant apartment right away. Good for you and good luck renting it!

  4. Tenant turnover can be scary, costly, and frustrating. I think within a big market like Vancouver you shouldn’t have trouble finding a tenant!

    And don’t be afraid to adjust the amount you are willing to rent your condo for! Losing a small amount monthly is better than having one whole extra month of vacancy!

  5. Good luck with finding a new tenant. My understanding is that the Vancouver market has a relatively low vacancy rate, right? Hopefully you’ll be able to rent out the unit soon.

    • CF says:

      Thanks! The rental market in Vancouver is pretty competitive, but also depends on the location. Our condo is in a decent location, but not one of the most high-demand areas unfortunately.

  6. Unless you’re asking for rent that’s significantly higher than market value, I wouldn’t think you’d have a big problem finding a tenant in a low vacancy market. And in the meantime, that’s what you build up a fund to cover expenses when it’s unoccupied.

    What I don’t understand is why any of this has to do with selling the place? Why would you intentionally leave it empty for a sale? Around here, rentals sell MUCH quicker if there are already good, pre-screened tenants in place with a long-term lease remaining on their contract. And our rental contracts are all written so that if we sell and the new owners want them out, our tenants get 30 days notice to leave.

    • CF says:

      It’s mostly just personal preference. If we decided to sell it, I would want the unit empty so that we could clean it up and stage it to be beautiful.

      I’m also not sure what the rules are around here for tenant leases when the owner sells – it’s something I’d consider looking into if we were put in that position. I’m hopeful that we’ll be able to rent it out for May 1st though.

  7. Pauline says:

    on the plus side you had the same tenants for a long time! my tenants of 3+ years moved at 6 months ago and I asked the other tenants to look for a replacement, so it was almost painless for me. I don’t like to keep too much money for emergencies, if I had to pay the full mortgage for 2 months it would be tough but feasible with current income streams. My place has never been empty more than a week in 4 years (and it was 1 room out of 3) so I know I am lucky. Careful with the price estimate of the realtor, when I sold another property last year they all gave me very high prices to get my business, then didn’t sell, then after a few months tried a low ball price to get me to sign. I had to sell directly.

    • CF says:

      I do feel very fortunate that our first tenants were so responsible and that they stayed for so long! Our realtor actually advised us to hold on to the property and rent it out for a little longer – she’s pretty honest for a realtor (and she’s made good money off of us already…)

      I hope the next set of tenants will be similar.

  8. Mrs. 1500 says:

    It is far better to have it empty for a month or two than to rent to the wrong person. Ask any landlord for a horror story, and you will likely find some to curl your toes.

    Check out any potential renters through background checks and credit checks. Go with your gut – if it doesn’t feel right, it isn’t right. Eviction, at least in the US, is a long drawn out process.

    Good luck!

    • CF says:

      Laws here tend to favour renters as well, unfortunately. Not all landlords are scummy! :( We generally do a reference and credit check for our potential tenants. Costs a bit of money, but worth it.

  9. Mackenzie says:

    I think it’s great that you have contingencies in place and have thought everything through. Good luck with renting out the condo!

  10. eemusings says:

    “I’ve done some (slightly unethical) market testing and we would be able to rent our current unit for the cost of the mortgage.”

    Haha – what did that entail?

    How far apart are the apartments?

    • CF says:

      Haha… I posted an ad on Craigslist for my current condo, just to price out the potential rent and the type of tenants who would apply. I was able to easily get 4+ quality applications from professional employed singles/couples in less than a day. So I think we wouldn’t have any trouble renting it out.

      The two apartments are only about a 5 minute drive from each other, but the neighbourhoods are quite different.

  11. Love the slightly unethical market testing! I assume you posted an ad and then told people it was unavailable already? Hahaha.

    As to someone’s comment above, in BC the notice laws for change of purpose (rental to owner occupied) are actually quite long and generally require the refunding of rent for a certain period. I can’t remember details anymore, but you have to give something like 3 months notice, unless a lease states otherwise and is only month to month. That said, most don’t know the laws. So, given they have owned it for awhile, the numbers may not make it a rental unit for a new buyer, so more options are open if it’s unoccupied.

    • CF says:

      Good guess ;)

      I actually didn’t know the exact details of the law in BC, so thanks for that information! In the end, our realtor advised us to hang onto it for a little while longer, if possible. So, we’re showing it this week to a few potential renters.

  12. bf and I have been thinking about purchasing a rental property. We run hypotheticals by each other all the time about what we’d do if our renters moved out, we couldn’t find renters etc. etc. I’m a worrier, but I’d rather plan for the worst just in case. Hope you find new renters soon.

  13. Wow, when me and my BF buy a place to rent out eventually, we are following your plan! Sounds like you’ve got a plan for every possible scenario.

  14. It sounds like you have a very well thought out plan – good for you! Hopefully the best case scenario works out and you can find a renter or buyer nearly immediately.

  15. Jose says:

    I’m not a landlord but it has to suck to lose a long term tenant. My neighbor rents his house out and had three tenants in less than a year that were the absolute worse. I’d be surprised I got more than three months rent out of the place for the year. I hope you get a good tenant to replace the ones your losing!

  16. Great call with the emergency funds! Would be interested to know what kind of savings account you put these in, if a separate account.

  17. Adam Kamerer says:

    I think the fact that you have contingencies within contingencies is probably a good sign that you’ll be fine, no matter what happens. :)

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