Real Estate

Buying a condo now to retire in later

  • Last Updated:
  • Jul 18th, 2018 3:57 pm
[OP]
Jr. Member
Oct 21, 2016
148 posts
16 upvotes

Buying a condo now to retire in later

Hi

I have a paid off primary residence . Is it a good idea to buy an investment condo now in the south Etobicoke Humber bay or along subway line islington or Kipling and Bloor area 500 square feet one bedroom for 400k around 120k down mortgage rest . Hopefully rent it out and break even . My purpose is eventually to move in to the condo and sell my primary residence a detached house 3 bed 2 bath bungalow in central Etobicoke Islington rathburn area when I retire in 20 to 25 years . The condo will pretty much pay itself off by then and I will be ready to downsize with my wife hopefully by then kids will be self sufficient .is this a good strategy or is it better to just keep putting my surplus money into the stock market in the form of ETFs and forget about the condo idea .
55 replies
Deal Addict
User avatar
Jan 19, 2005
3514 posts
501 upvotes
Diversification is a sound financial plan. If you were to invest all your excess cash into ETF's, you may be able to buy out the condo outright in 20-25 yrs. Of course some RE bulls will debate that it's never a bad idea to go all into RE by looking at the last 20-25 yrs. as reference.
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Deal Fanatic
Feb 9, 2009
6084 posts
3340 upvotes
go for it... 25 years is so long away you'll be well ahead.
Member
Jan 1, 2017
294 posts
169 upvotes
500 sq f condo for two people when you retire? That’s incredibly small. You should consider getting something at least 750 sq f.
Deal Addict
Jul 14, 2002
1473 posts
544 upvotes
Looks like you have a safety net with your primary residence being paid off.
I would do it, in 20 - 25 years that condo will be paid off by your renters.
I know people that are doing the same thing but with multiple homes.
Deal Addict
Nov 13, 2013
1146 posts
416 upvotes
OTTAWA
recordman wrote:
Jul 12th, 2018 8:10 pm
Diversification is a sound financial plan. If you were to invest all your excess cash into ETF's, you may be able to buy out the condo outright in 20-25 yrs. Of course some RE bulls will debate that it's never a bad idea to go all into RE by looking at the last 20-25 yrs. as reference.
This is putting all your eggs in the Toronto Real Estate Market. Sure past results suggest we all should have done that. Leverage does exaggerate real estate gains but also increase the downside potential.
Renting a condo is also a hassle. If you for sure want to retire in Canada I would put a big chunk in Canadian ETFs and the remainder in the rest of the world. If you might want to retire abroad I would put the bulk in foreign ETFs.
Jr. Member
May 18, 2015
197 posts
272 upvotes
Thornhill, ON
Shaun80 wrote:
Jul 12th, 2018 7:51 pm
Hi

I have a paid off primary residence . Is it a good idea to buy an investment condo now in the south Etobicoke Humber bay or along subway line islington or Kipling and Bloor area 500 square feet one bedroom for 400k around 120k down mortgage rest . Hopefully rent it out and break even . My purpose is eventually to move in to the condo and sell my primary residence a detached house 3 bed 2 bath bungalow in central Etobicoke Islington rathburn area when I retire in 20 to 25 years . The condo will pretty much pay itself off by then and I will be ready to downsize with my wife hopefully by then kids will be self sufficient .is this a good strategy or is it better to just keep putting my surplus money into the stock market in the form of ETFs and forget about the condo idea .
Jr. Member
May 18, 2015
197 posts
272 upvotes
Thornhill, ON
dantey wrote:
Jul 13th, 2018 1:40 am
I know people that are doing the same thing but with multiple homes.
Aaaaand they're all going to get ass-raped in the end.

RE is an excellent tax vector that broke municipalities, provinces and feds will tap when - not if, but WHEN - it comes time to pay for decades of gov largess. Sorry, but anything liquid will be sheltered or moved off shore. The suckers left holding multiple homes will be milked dry when the starving commies come for their fair share. You'll be the low hanging fruit.
Penalty Box
User avatar
Dec 13, 2016
1694 posts
1316 upvotes
jonkoktosen wrote:
Jul 13th, 2018 2:50 am
Aaaaand they're all going to get ass-raped in the end.

RE is an excellent tax vector that broke municipalities, provinces and feds will tap when - not if, but WHEN - it comes time to pay for decades of gov largess. Sorry, but anything liquid will be sheltered or moved off shore. The suckers left holding multiple homes will be milked dry when the starving commies come for their fair share. You'll be the low hanging fruit.
And before that happens, they will come after your stock portfolio first and let's not forget rrsp and private pensions they can take such a big chunk from.

But yes, keep hallucinating about real estate being the ultimate evil....because once your dear government grabs you by the nutz, you'll be wishing you actually owned real estate with your incredible scenario.
Jr. Member
May 18, 2015
197 posts
272 upvotes
Thornhill, ON
BiegeToyota wrote:
Jul 13th, 2018 4:04 am
And before that happens, they will come after your stock portfolio first and let's not forget rrsp and private pensions they can take such a big chunk from.

But yes, keep hallucinating about real estate being the ultimate evil....because once your dear government grabs you by the nutz, you'll be wishing you actually owned real estate with your incredible scenario.
It's not an incredible scenario, it's been happening for centuries, if not millennia - it's called capital flight, and unfortunately RE is illiquid and can't flee. And btw I don't think real estate is evil at all, I just know how it will play out...

OP is considering using RE as a retirement strategy at a time when RE has already peaked, credit is contracting, rates are rising globally, and worst of all, the new breed of voters are life-long, full blown socialists who view housing as a "right", thus giving cash-starved and severely indebted governments - at all levels - the political cover to tax the F out of multiple home owners.
Deal Addict
Feb 22, 2011
3959 posts
3573 upvotes
Toronto
recordman wrote:
Jul 12th, 2018 8:10 pm
Diversification is a sound financial plan. If you were to invest all your excess cash into ETF's, you may be able to buy out the condo outright in 20-25 yrs. Of course some RE bulls will debate that it's never a bad idea to go all into RE by looking at the last 20-25 yrs. as reference.
When did the OP say they will be going all in? They have a paid off house they only need 20% down for the condo to rent it out and then be cashflow neutral. They wouldn't have to contribute anything else for the next 25 years and can still invest in ETF's...

OP depending on the details this could be an amazing idea. My wife also bought a condo on the lake DT she plans for us to retire in one day or let the kids live in if they go to U of T. It literally pays itself off plus extra cash. So for the $40k we put in 20 years from now we will have a $600k (plus 20 yaers of appreciation) condo with no mortgage, paid off by a tenant.

That $40k in a market fund in 20 years would only have about $120k value whereas a condo that is $600k now in 20 years will probably be over $1.2m. That is 10x higher return.

Plus you can still invest all your extra cash into market funds. Do not get your advice from a bunch of jaded people angry RE is so expensive. Find someone you trust who is successful in life to give you advice. Do not listen to unsuccessful people, ever.
Sr. Member
Dec 4, 2016
555 posts
207 upvotes
Personally, I would consider buying an investment condo after maxing out TFSA and RRSP. Managing an asset that's cashflow negative but reports a taxable profit to CRA is a bit of a headache.
Deal Fanatic
User avatar
Jun 26, 2005
8198 posts
636 upvotes
Toronto
Congrats on being mortgage free, its an amazing situation. I was once like that on my first residence (condo, all cash paid, back many years ago). Every paycheck my wife and I got, minus expenses (VISA, etc), and that's it. Soooo much disposible income.

I also thought of the same thing as you OP before. Here's some points I came to conclusion of:

- do both, like rjg4235 said, you only need 20% down, so use HELOC. As we all know, using someone else's money to earn money is the smartest business method

- RE inveestment has an advantage due to leverage. You mortgage 80%, and your payments is helped by rent. Rent that increases. Yes, there's expenses too.

- sure, buy in an area that you think you may like, but in reality, in 20-25 yrs, that condo may be sooo old, or things may happen (condo has mold issues, leaking, or lots of Airbnb, bad population moves is), so when you retire, you may not want to go into this condo any more
- by 20yrs, you may like the other newer condos, facilities, area, etc. so don't spend TOOOO much time finding a place where you want to retire in

- I say this because a unit for (1) living in yourself versus (2) renting out has very different requirements/attributes

(1) you do NOT want a condo with 90% renters, they dont give a crap about your building, will be loud, don't care, damange things, vandalism, throwing things off balconies, etc. I'd rather retire in a building with lots of families, kids, etc. Parents care (compared to single young punks)

(2) the location needs to have a high demand of quality renters. IMO: places near hospital, so your renters are doctors, nurses, professionals. I tend to stay away of student renters, that's just me

- the above are just some differences, so you can see, you may not want to live / retire in building (2)

- my suggestion is, using condo renting as an investment. then when you sell it in 25yrs, use THAT money to buy a new condo unit where you want to retire. 1 bedroom, 2, 3, whatever you want

- your goal now should be to get the highest rate of return in 20-25 years

- so right now, invest in condos with your cash, 20% down in a QUALITY location for (2) factors

- the size depends on your preferences. 1 bedroom = single renters 2 bedroom = family renters with kids or multiple adults

- the GOLDEN rule in RE is: Location, location, location. Yes, pay more now, but you are financially well off, and it will come back in multiple folds by the time its 20-25 yrs.

In fact, if you can, I'd buy 2 condos, if not 3. Imagine in 25 yrs, you have:

- stock portfolio
- 1 primary residence (mortgage free)
- 3 condo units (mortgage free)

All condos will be cash positive, giving you monthly income.

You can sell off 1 or 2 when you retire, that will MORE than pay for a new condo 100% mortgage free.

Or keep the condos and get monthly income, I bet even more than your current paycheck from work


Well, actually I may have just described what I'm doing myself right now hehe
Deal Fanatic
Nov 2, 2013
5208 posts
1094 upvotes
Edmonton, AB
BlueSolstice wrote:
Jul 13th, 2018 9:54 am
Personally, I would consider buying an investment condo after maxing out TFSA and RRSP. Managing an asset that's cashflow negative but reports a taxable profit to CRA is a bit of a headache.
Because it is actually a taxable profit, lol. Mortgage interest is the portion of the debt that is an expense, not the whole payment.

If you rent your place out for $1,800/month, but mortgage payment is $1,650 - where $750 is interest - and condo fee $350, you are cashflow negative -$200/month. But you are really producing earnings before taxes of 1800 - 750 - 350 = 700/month.

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