[GovernorARNOLD]

RENT VS OWN the dilemma.

I have a mortgage free condo, that I pay 720 a month for maintaince and taxes. If I sell this condo, I could put all the money into a GIC and have enough to rent a small 500sq feet condo based on the interest alone.

But I’m worried about the Toronto market. This plan would be a huge downsize and I love my current place. However, I would feel safe about my investment/money and would be able continue my ( somewhat ) bill-free lifestyle while freezing my equity.

Here are the numbers:

Current place: OWNER
Cityplace

1000sq feet 2 bed + den condo, high floor, parking with all the bells and whistles

$580 per month; Condo fees + taxes + insurance ( this calculation includes the income from my parking spot )

Purchase Price: 250,000
Current Value: 425,000


Amount generated from GIC of 400,000 @ 4% = approx $1300 per month


The Plan: RENT
Cityplace or equivalent building with like amenities

500-550 square feet, Jr one bed / studio

$1000 – 1100 per month for rent


What do you think? Stay where I am or get out and rent. Please advise. Thanks!

 

[Alvar]

Rent for about a year or so, then buy again. The deals will be forthcoming on condos at that time as both a number of larger projects (Murano, Maple Leaf Residences, etc.) come on stream, and the faltering economy peaks. It will be then that you can get a good bargain. Could work out quite nicely for you.

 

[TKTKTK]

Well, if you're going to rent - there are much nicer buildings to rent in than Cityplace, and for a better price than $1100 for a studio.

 

[cabbagetowner]

Rent for about a year or so, then buy again. The deals will be forthcoming on condos at that time as both a number of larger projects (Murano, Maple Leaf Residences, etc.) come on stream, and the faltering economy peaks. It will be then that you can get a good bargain. Could work out quite nicely for you.

not a good idea. consider the costs (ltt, lawyer fees, title insurance, agent commission, movers...) which are real disincentives for moving in and out of the real estate. never a good idea to speculate like that.

 

[Alvar]

One does have to be carfull re the timing of real estate. However, things are slowing down. Just keep an eye on the market.

 

[projectcontrol]

Bad idea. You're selling for the wrong reason. Why give up the place you love for a after tax income of $933/month - assuming you're in the 30% tax bracket.

The $933/mth wouldn't cover your $1050 studio + parking.

Question: Is the $933/mth worth giving up the place that you love which you spend at least 12 hours/day in. But if you're unhappy with your place and the place don't meet you need, then by all mean sell and move on.

I've been through this before in the1990's. To this day I regret selling my home that brought me so much happiness which money can't buy.

Only sell if your home don't meet you needs or you're unhappy where you are.

This advice from a guy who's been through 3 real estate boom and bust - the 1970's, the 1980's and the 1990's.

 

[urbandreamer]

Sell. Always take an easy profit.

Then live below your means, something many people have trouble doing. Live in a cheap rental apartment--astonishing deals to be had, not a condo rental. Save your money.

When the correction hits, pounce on a nice house.

 

[lowesthangingfruit]

Or you could get the best of both worlds like I suggested in my previous post "Canadian real estate plays". Nothing wrong with buying some insurance to hedge your bets in this type of market even though some think it is foolish.

 

[lowesthangingfruit]

Fruit,

Canadian REIT short does not directly correlate to Cityplace price drop.

I know that REIT short is not directly correlated. Plus those monthly distributions ur paying on short side eats away at profits and alot of them are fairly illiquid. That's why I posted new thread as I was looking for new ideas. Looked at Rona, financials, Norbord but those already beaten up and risk/reward is not worth it now. Couldn't find any major builders/developers listed.

Listen, if I could short the speculative condo market, I would. But hard to get direct correlation. Maybe I'll just hang onto my US RE shorts as a proxy instead.

 

[andrejeffry]

I say sell it and go for a more aggressive investment, especially if you're mid-30s or younger. You will not get more money from your current place. Stock market is down. If you sell it, then you'd have plenty of liquid asset and be ready to jump on the market when it recovers.

 

[BobBob]

Everyone keeps talking about this expected 10-20% drop in real-estate, and this thread is a testament to the sort of moves that people are pondering as a result. Of course, a significant enough number of such moves (sell now! go to cash! rent for a while!) will *cause*, or at least exacerbate, a real estate crash, and the next price boom when everyone decides to "pounce on a house" afterwards. Pretty silly, the whole thing.

 

[Alvar]

Very valid points raised, Shakyamuni. The optimists also always use the fact that the majority of new immigrants settle in the G.T.A. However, not everyone of those immigrants is purchasing a brand new, two-bedroom condo. In fact, quite a few move in with relatives. Again, nothing goes up for ever, and Toronto has had a nice run. Let us just hope it is a soft landing.

 

[andrejeffry]

Everyone keeps talking about this expected 10-20% drop in real-estate, and this thread is a testament to the sort of moves that people are pondering as a result. Of course, a significant enough number of such moves (sell now! go to cash! rent for a while!) will *cause*, or at least exacerbate, a real estate crash, and the next price boom when everyone decides to "pounce on a house" afterwards. Pretty silly, the whole thing.

First of all, I don't think real estate market in Canada will drop 10-20%, even with all the doom and glooms most here predict. I think it's going to level off, and stay that way for the next few years. In other word, the time to make money in real estate is over.

So if the poster is young and looking to invest his money instead of just sitting in his property, then I suggest him to sell and invest in the market. The market is down, but it will recover sooner than real estate market.

It's just common sense, not a pessimistic attitude at all. I sold one of my properties last month to have less exposure in real estate.

 

[cabbagetowner]

First of all, I don't think real estate market in Canada will drop 10-20%, even with all the doom and glooms most here predict. I think it's going to level off, and stay that way for the next few years. In other word, the time to make money in real estate is over.

So if the poster is young and looking to invest his money instead of just sitting in his property, then I suggest him to sell and invest in the market. The market is down, but it will recover sooner than real estate market.

It's just common sense, not a pessimistic attitude at all. I sold one of my properties last month to have less exposure in real estate.

it never hurts to take some money off the table, especially with the run up we've had in the gta. however remember what the oracle says “Be Fearful When Others Are Greedy and Greedy When Others Are Fearfulâ€

 

[TrickyRicky]

These rent vs own arguments are re-hashed constantly. The point I'd like to make is that the answer is there is no right or wrong answer but one, be honest with yourself. Sounds fluffy but your home is not really an investment, it is more an expression of your character. Investment decisions can be critiqued on the face as wise or unsound. But the purchase or sale of your home can only be criticized if you are not true to yourself, meaning you buy or sell something that you really don't want to buy or sell. This sounds odd but I would say a substantial, perhaps the majority, of buyers and sellers are not true to themselves. They buy or sell only to later discover that they were in error. That what they bought or sold was not in restrospect what they wanted.