Should You Hold On To Your Condo Or Sell It?


Breaking into the Toronto real estate market is no easy feat, especially for first-time investors. Housing prices are down, but still high enough to be out of range for many people. The down payment is often the hardest part of making your first investment. 

For first-time buyers looking for a residential home, there are programs available, like the Home Buyer’s Plan and the Land Transfer Tax Rebate. In addition, a residential buyer often needs less for their down payment.

There are no breaks like this for an investor. You’ll need a minimum of 20% for your down payment on an income property. With the average sale price in Toronto hovering around $1 million, this means you need $200,000 upfront. How can you access these kinds of funds? 

Current property owners are at a significant advantage. Instead of selling your condo, you could use your equity to fund your down payment. If you’ve owned your condo for more than a few years, you’re likely halfway there. You now have two choices when it’s time to upgrade to a new home.

Option 1: Hold on to Your Condo as an Investment 

For the right person, holding on to the property is a better long-term option. Keeping your condo while buying a second home allows you to potentially double your equity growth. You keep building your equity on the property that you already own. Plus, you’ll enjoy the gains as your new home prices in value.

As an added bonus, you’ll be able to rent out your unit to cover all or most of the mortgage. With the high cost of buying in Toronto and the fast-growing population, many people are looking for rentals. Strangely enough, rental prices have increased even though property values are currently down, making it easier to generate cash flow.

Later on, you can decide if you want to return to your condo, bequeath it to a family member or sell it at a profit.

The downside of this option is that you won’t have the immediate cash flow you would have by selling. Unless you have access to significant funds, you may see some lean times before your investment pays off.

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Option 2: Sell Your Condo

Selling your condo before upgrading to your new home is the easiest and least risky option. Housing values have exploded over the last decade. And even if you purchased as early as three years ago, you can sell at a healthy profit in the current market. Selling your condo allows you to enjoy the financial benefits much faster than you would by renting it out. Once sold, you know exactly how much you can afford for your new home. In addition, you don’t have to worry about the headaches of being a landlord. 

There are no phone calls in the middle of the night because the heat stopped working, and no tenants to manage.

The downside is you forgo the possibility of generating income from your condo and won’t benefit from any further equity gains. You also won’t have the option of returning to your condo if you ever decide to downsize.

How to Decide Your Best Option

Real estate is a fantastic investment, especially now that housing prices have dropped from their peak earlier in the year. However, that doesn’t mean that it’s for everyone. Not everyone has the cash flow to make it viable, and some simply don’t want the risk. Others are not cut out to be a landlord. 

Knowledge about the current market is the key to your success, whether you decide to sell or invest. Check out some of our recent updates below:

Crunch the Numbers

Before deciding what to do, talk to a financial advisor and a mortgage broker to determine if holding onto your property is financially viable.Are you relying on the proceeds of your sale to fund your new home, or do you have some savings set aside? Successful real estate investment depends on being ready for anything.

Unexpected costs often arise, and it sometimes takes a while before you can find the right tenants for your unit.

Are You Willing to be a Landlord?

With the right tenant, being a landlord can be a breeze. Yes, you will sometimes have to deal with those midnight phone calls when repairs are needed. However, if everything else goes smoothly, you can look forward to your rent payment every month with very little work on your part. 

The idea of passive income is appealing, but it doesn’t always work out that way.

A problem tenant can throw a wrench into your plans. The easiest solution may be to hire a property manager to handle everything for you, from vetting your tenants to chasing down rent payments and arranging for repairs. However, an outside management team will eat into your profits, and you may end up carrying the property at a loss. For some people, the shortfall in monthly cash can be too much of a struggle. 

For some investors, this short-term loss is acceptable because it’s offset by long-term equity gains. 

Do you want more help deciding whether you should sell or rent your condo? We have years of experience with buyers, sellers, and investors and are happy to walk you through your situation. Find out more about our condo expertise right here.