If you have have tried to sell your condo anytime in the last few months, you know what the Toronto real estate market is like better than anyone.
Condos in ‘hot’ buildings that a year ago would sell over asking in week are now languishing on the market for weeks. Price reductions are happening every day. Conditional offers are welcomed with open arms as opposed to being laughed at in the heady days of 2007 and early 2008.
The bottom line is that it is a tough market to be a seller. The pressure is on you to have an immaculate unit in a great location at an irresistible price. And even then, that is no guarantee of success.
One option that you might want to consider if you find that you can’t sell your condo, is to rent it. The rental market is not that bad right now. Leases are being signed every day as some would-be buyers are deciding to rent for another year. After you rent out your condo, you’ve got to live somewhere, so what do you do?
If you are fortunate enough to be in a financial position to carry two mortgages, then you buy somewhere else and take advantage of the market. But if you are like most sellers, that is not an option, so might I suggest renting yourself. That’s right, a real estate agent is telling you to rent and not buy (queue the dropping of jaws).
This is just what one of my clients did recently. Their condo unfortunately did not sell in a timely manner and due to personal constraints, they had to move, they could not wait for the market. So they rented out their 1 bedroom condo for about $1600 per month and then found a suitable place themselves in another part of the city for about $1200 per month. So they are actually ‘clearing’ about $400 a month while still paying down their mortgage. Their plan is to wait a year, see if the market has improved, and then either sell, or continue to rent. Not bad option if you can make it work.
I always love to hear your feedback. Leave me a comment or contact me any time.
January 31st, 2009 at 7:14 pm
Hi Andrew,
That’s good advice and a sign of a good realtor when you give advice like that. As you have shown, at the end of the day its the clients needs first!
Great post.
M
February 1st, 2009 at 1:04 am
Hi Guys,
Unfortunately, I have to disagree with the advice being offered. Suggesting the client is “clearing” $400 a month is misleading. The client needs to understand his or her position on an after-tax basis which may very well be quite different. Furthermore, the “change in use” rules should be considered when it comes to Principal Residence. The latter can result in a capital gain in certain circumstances.
I would recommend using caution in advancing this strategy. You are well advised to have any client considering this strategy seek professional tax advice.
Carl
p.s. I like the site.