Advise on selling or keeping the existing property as I move to new

Keep and rent out.

Keep as long as you can swing it financially and want to be a landlord, it's not effort free.

Keep it.

BeamerDreamer2000 wrote: ↑ Hi All,

It's the first time I am upgrading my house. I am moving from a Single Garage detached in Brampton to a double garage in Halton hills.

I will be getting $4500 rent from Brampton house(basement + upper) and mortgage payment would be $4500(I refinanced it to buy for my next house). Property taxes are separate $500/month.

This is with Variable mortgage rate of 1.7% as of today.

Not sure if it's good to keep it or sell it. What's your experience say?

Keep and rent out.

Don't sell! Don't help those bears.

Something else to consider in your decision. The interest on the funds you borrowed with your proposed rental property as security would not be tax deductible as the proceeds were used to purchase your next personal residence. So you may wind up paying significant tax on your rental income.

Important question : what will you be doing with that money (and leverage at 2-3%) instead?

DaveTheDude wrote: ↑ Something else to consider in your decision. The interest on the funds you borrowed with your proposed rental property as security would not be tax deductible as the proceeds were used to purchase your next personal residence. So you may wind up paying significant tax on your rental income.

I didn't propose that as a rental. It wont be rental until I move to another property. So funds borrowed were on an existing primary residence.

At least include all the cost in your decision for example taxes, insurance higher mortgage cost in case rate rise agent commissions if agent helping you get renter etc.

BeamerDreamer2000 wrote: ↑ I didn't propose that as a rental. It wont be rental until I move to another property. So funds borrowed were on an existing primary residence.

Your original post said: " (I refinanced it to buy for my next house)". You are saying now you didn't take any money out of your existing house to put towards buying the second house.

Otherwise the interest still wouldn't be deductible if the existing house was your residence when the funds were borrowed and later became a rental. If those refinanced funds went towards the second personal house. The use of the funds determines its deductibility not the property used as security.

Keep it as long as your finances can handle it.

DaveTheDude wrote: ↑ Your original post said: " (I refinanced it to buy for my next house)". You are saying now you didn't take any money out of your existing house to put towards buying the second house.

Otherwise the interest still wouldn't be deductible if the existing house was your residence when the funds were borrowed and later became a rental. If those refinanced funds went towards the second personal house. The use of the funds determines its deductibility not the property used as security.

Got it now.

4500 is a huge amount for mortgage for a single car detached in brampton. How much is the house worth? If the house stays vacant for a couple of months or tenants stop paying all of sudden and it can take like 12 months to evict, can you afford this mortgage payment on top of property tax, insurance, repairs etc plus all the cost on your primary?

Only you can answer that.

You haven't answered on what you would do with the money yet. Tbh it's really hard to beat real estate with any kind of other investments because of the leverage. Also, how close you are to retirement makes a big difference, too.

Let's say you refinanced an existing 1mil house to 80% to buy your new house, at very low interest rate. If you sold, you would get back 200k minus fees and taxes (so, almost nothing). That amount of money would bring you almost nothing no matter what you invest it in.

But if you kept, then you have a 1mil investment going on. Even a 5% rise is a 50k gain!

I guess the biggest worry is interest rises, housing crash and bad tenants. That's where your age comes in. If you're young enough, resilient enough and have good enough financial management then you should be able to weather through any hiccups.

Plus it will become harder and harder to qualify for mortgages as time goes so if you're in, stay in. Imo.

If you are not willing to be a landlord, get some professional help from full service firms.
If you are not willing to shoulder the negative cash flow, sell.
If you want to learn, pay tuition and grow as a RE investor, try and see how you sleep at night.
Good luck.

DaveTheDude wrote: ↑ Something else to consider in your decision. The interest on the funds you borrowed with your proposed rental property as security would not be tax deductible as the proceeds were used to purchase your next personal residence. So you may wind up paying significant tax on your rental income.

So let me get this straight.

If you did a refinance on your primary residence and used those proceeds to buy a second property, is the interest on your existing mortgage tax deductible? How about the interest paid for the refinance, tax deductible?

1xTiMeR wrote: ↑ So let me get this straight.

If you did a refinance on your primary residence and used those proceeds to buy a second property, is the interest on your existing mortgage tax deductible? How about the interest paid for the refinance, tax deductible?

If you refinance your primary residence and use the those funds to buy an investment property that portion of interest is deductible. If you use the funds to buy another personal residence then it is not. Only the interest on the portion of the primary mortgage used for investment purposes is deductible.

Prepayment penalty interest on refinancing would be claimed over the life of the new mortgage ex. 5 years and not in one year.