Selling two properties to buy a house? Bad idea?

Go for it... you can afford it.. and it shows the bears not everyone who buys a million dollar property is doing it at minimum 20% and will die if a market crashes.

In fact most are like you who have significant equity and can afford to put a good chunk of change down.

Sorry off topic but again bears roarrrr they think everyone in super debt up to eyeballs roarrrr

Not many can afford a detached in the GVRD. Sell and realize your dream. You can always sell the condo and keep the townhouse as a rental.

I'd say sell your primary residence as you want to get a bigger place. Reason being you will not be taxed on capital gain. If you need the extra cash, you may consider selling your rental property as a second resort.

gti303 wrote: ↑

May 19th, 2017 11:19 am

Currently I have two properties. A rental in downtown Vancouver, and my primary residence in richmond.

My rental is a 2 bed room. Only fetches around 2700 rent since I never raised rent in a few years due to the tenants being really good. Was originally purchased 8 years ago for 650k. Currently realtor believes I can fetch close to 1.1. I still owe the banks 220k.

My primary is a townhouse that I love in. I purchased this in 2011 presale with the intention of starting a family in 2014. Purchase price was 505k...currently can probably fetch 700k. It is 1100sq ft. I currently owe 350k on it.

My dilemma is I actually never thought about moving to a larger space, since I never thought that was possible... But with the current Condo market... It might be if I move a bit further away. I am currently looking into south surrey.

I think selling to move into a large home further from the city isn't a great financial move, but I have two kids now, and 1100 sq ft is tight. It's doable... But for somone who was born in Canada... I just feel it's too small to raise children (yes yes we all know in hk it's normal for a family to live in a 500sq ft).

My other issue also is that housing prices in south surrey is nuts... I'm not too familiar with other suburbs so I haven't looked yet (I am only begging to look).

If I had to move on anything today. I'd try to list both properties, and wait until winter to move on a house.

What are the financial and real estate guru's take on this?

I think I am really lucky I can even think of doing this... Just can't believe the market at the moment.

Why not sell both and move to a modest detached in North Van? You have the equity assuming you have a decent income. Less to give up location wise and I am not a Vancouver expert but a more pleasant place to live. I would think it is safer in terms of potential downturn as outlying and marginal areas fall the fastest.

Sanyo wrote: ↑

May 19th, 2017 11:42 am

In fact most are like you who have significant equity and can afford to put a good chunk of change down.

Sorry off topic but again bears roarrrr they think everyone in super debt up to eyeballs roarrrr

Sure. Household debt at record highs is just fake news.

Buy Buy Buy

Sanyo wrote: ↑

May 19th, 2017 11:42 am

Go for it... you can afford it.. and it shows the bears not everyone who buys a million dollar property is doing it at minimum 20% and will die if a market crashes.

In fact most are like you who have significant equity and can afford to put a good chunk of change down.

Sorry off topic but again bears roarrrr they think everyone in super debt up to eyeballs roarrrr

You used to be balanced on these forums..Now you're an unbridled RE bull lacking any ability to see both sides of the equation. Now anyone who might even be slightly bearish is labeled a "priced out renter".

What happened?

cartfan123 wrote: ↑

May 19th, 2017 3:17 pm

You used to be balanced on these forums..Now you're an unbridled RE bull lacking any ability to see both sides of the equation. Now anyone who might even be slightly bearish is labeled a "priced out renter".

What happened?

RFD is a playground full of bullies a la "priced out renter" phenomenon you alluded to. He just wanted to join the "RE going to the moon" cool kids.

haha...okaaay....thanks for the input guys...

I would have to sell both properties and still have a decent mortgage to get a decent detached home....but it is my dream...but I have a lot of dreams lol

I could just be mortgage free and learn to live in my 1100sq ft unit with 2 kids...but ah the greed...

Quite a dilemma! You gain by upgrading to a detached home but lose in location. Commuting from Surrey can be a hassle depending on your work location. Downtown Vancouver condos will always be desirable due to supply issue.

Since I really detest long commutes I would stay put. I don't think the value of Surrey detached homes will pull ahead of your properties but I don't have a crystal ball.

Save and invest aggressively to buy a detached home in Vancouver .

Let's treat this as a case study so that people can pitch in to solve this and improve all our financial intelligence. I will have first crack, let me know what you guys think ok?

1) Condo $1,100,000
($1000/sq ft in downtown) I assume the 2 bdr is 1000~1100 sq ft
Income $2,700
Debt $220,000

Here is my thought. Please provide your feedback:

The mortgage amount remaining is $220K which is not bad consider the mortgage rate is still so low. You probably still have positive cash flow or break even after paying all the property related expenses. Things I will do some research is to find out 1) market rental income for similar unit like yours 2) Capital gain amount if you decide to sell this unit 3) Read the strata minutes to look at contingency reserve and see if any special assessment owners have to fork out next few years. You can leave it self-sustain and earn you cash flow and capital appreciation. I think the supply of land in downtown is limited and there is always a demand in downtown and you don't have to worry to find tenants...good tenants that you can pick. So I will not sell the unit unless you really need the cash to buy a house.

2) Townhouse $700,000
1100 sq ft
Income if rent out $ ______
Debt $350,000

Primary residence: No capital gain if you decide to sell it. The question is how much income you can get if you decide to rent out this townhouse? Find out if you are generating any positive cash flow that can self-sustain? I would upsize to duplex or house if I can finance it comfortably by say selling the townhouse. Assume your net proceed is $300k which should be enough for 30% down payment on say $1million dollar house and bank will approve your mortgage. Surrey is developing rapidly and it has potential for further growth in value compare with Richmond especially if you own land value. I think you should also look at other location like White Rock (coz of better school and close to Richmond), Burnaby or even Langley (bigger lot and value)? It will work if you buy a house or duplex with suite that can rent out for mortgage helper. (If you are ok with live with tenants)

What do you think?

Jackson75 wrote: ↑

May 20th, 2017 11:14 am

Let's treat this as a case study so that people can pitch in to solve this and improve all our financial intelligence. I will have first crack, let me know what you guys think ok?

1) Condo $1,100,000
($1000/sq ft in downtown) I assume the 2 bdr is 1000~1100 sq ft
Income $2,700
Debt $220,000

Here is my thought. Please provide your feedback:

The mortgage amount remaining is $220K which is not bad consider the mortgage rate is still so low. You probably still have positive cash flow or break even after paying all the property related expenses. Things I will do some research is to find out 1) market rental income for similar unit like yours 2) Capital gain amount if you decide to sell this unit 3) Read the strata minutes to look at contingency reserve and see if any special assessment owners have to fork out next few years. You can leave it self-sustain and earn you cash flow and capital appreciation. I think the supply of land in downtown is limited and there is always a demand in downtown and you don't have to worry to find tenants...good tenants that you can pick. So I will not sell the unit unless you really need the cash to buy a house.

2) Townhouse $700,000
1100 sq ft
Income if rent out $ ______
Debt $350,000

Primary residence: No capital gain if you decide to sell it. The question is how much income you can get if you decide to rent out this townhouse? Find out if you are generating any positive cash flow that can self-sustain? I would upsize to duplex or house if I can finance it comfortably by say selling the townhouse. Assume your net proceed is $300k which should be enough for 30% down payment on say $1million dollar house and bank will approve your mortgage. Surrey is developing rapidly and it has potential for further growth in value compare with Richmond especially if you own land value. I think you should also look at other location like White Rock (coz of better school and close to Richmond), Burnaby or even Langley (bigger lot and value)? It will work if you buy a house or duplex with suite that can rent out for mortgage helper. (If you are ok with live with tenants)

What do you think?

This was the kind of answer I was looking for .

My current townhouse can probably fetch around 2400...just enough to cover costs.

My downtown unit is 920sq ft, but it has a water /mountain unobstructed view. The rent I am charging is definitely below market average. I could probably fetch 3k. There are no special levies coming and financials are ok. I think I forgot to mention that I owe my parents 300k on this that I will pay back upon selling.

What I cannot get a grip on is that the half decent homes in the semiahmoo area (my area of preference) is around 1.5m. Same with white Rock.

My dad would move in with me once I get a larger place, and he can toss in $600 a month to help with the mortgage.

Quick question, I was living at my downtown place until mid 2014. I can claim that as my primary residence for up to four years afterwards right?

a bit off topic, but a townhouse purchased 6 years ago has only gone up less than 40%? from 505k to 700k? based on the news and how much growth BC has seen in the past couple of years seems kinda low

Do you have any other investments? How comfortable are you with this amount of your net worth tied up in two properties?

With RFD logic, interest rates will rise to infinity, everyone will lose their houses, then one of us will jump out of our mom's basement, get a deal, and get rich when the market rebounds.

On a serious note, it depends on your needs/wants and goals. If you move into one property, when you sell later (if you ever do), since it is your principal residence, you won't have to pay capital gains. If you sell your rental property, you will pay capital gains.

Before you do anything, you have to consider if your current equity, income, and credit are even sufficient to finance the new home with today's ever-tightening mortgage rules.

Say if you do move into one house, here are your options to make use of the future appreciation:
(A) Re-mortgage. This is the cheapest way to acquire investment funds, and there are many investments that will beat today's mortgage rates. You'll pay penalties for breaking your term early, but you'll still easily end up miles ahead.
(B) LOC. This is more flexible, has no penalties, and less hassle to acquire investment funds, but you pay higher interest- negating the advantage of avoiding penalties. But you can write off the interest, as your investment income reported would be investment income - LOC interest. Whether this is advantageous over (A) depends on your tax bracket, as basically you are banking on that after factoring in tax write-off, you pay less for those investment funds.
(C) Sell it, cash out, and downsize.
(D) Do nothing and just brag about your $X worth house.

Most people have (C) in their head, but your primary residence is not an investment in that scenario. It is a roof over your head. With that perspective, it doesn't matter if today your house is worth $X and tomorrow it is worth $X+Y. You sell in a good market, then you will pay more dollars per sq ft. for your next home. So back to square 1. So most people don't actually end up doing this after coming to that realization years later. Or they do liquidate and regret it. The CRA knows this and that's why they don't go after you for capital gains.

You'd also lose out on that rental income unless your new property is partially rented out. The advantage of this is the rental income is often tax free under certain scenarios (CRA views it as a housing cost supplement rather than income). But then you're stuck living with renters in the same home. Many people take this route everything else aside.

The move to one large home would only make sense if you're willing to do (A) or (B)- as later on, you could probably even re-buy that rental you just sold.

I've had a similar thought in my head as I also have two places, but in Edmonton. One is my home, the other soon-to-be rental. The market here is very different and my intentions (and risk appetite) are likely much more aggressive than yours.

I am leaning towards the sale of both (#1 partly because of rapidly rising condo fees and problems with the unit that the condo board is dragging its feet with) and purchase of one larger property- but I am a tradesman and know others with decades with homebuilding experience. The plan I had at the back of my head:
(1) Purchase 1 more property in 2018 or late 2017- likely a pre-con to get a better deal and I do not mind the wait. Upon completion, move into it as principal residence for 1 year (to get past lenders' hate of frequent credit seekers and risk takers). Rent out previous condo #2 and continue to rent out condo #1.
(2) Buy 4th property- an old but liveable home on a large lot in a hot area. Sell condo #1 and #2 to liquidate equity and appreciation.
(3) Demolish old house and live in previous condo #3. Build new house. Sale of condos funds project with cash leftover for living expenses. We calculated supplies to be approximately $100/sq ft, and current market value of new homes in this area is $400-500/sq ft. depending on various factors. Labour is estimated to cost $150,000 for the year (mine valued at $100,000 based on opportunity cost, then $50,000 for extra hand), minus whatever other income I have during work on this project. Time frame is 1 year completion, though shorter is possible. Much faster with more hands- with a team of 4 hardworking people it's possible to do a build within 3 months. Potentially this is much cheaper.
(4) Upon completion of build, live in it as my home and re-mortgage it based on new market value. Put as little down as possible and use rest on stocks.