Time to sell investment property?

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Many Canadians are Changing Their Financial Planning Strategies

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It’s been dubbed the “perfect storm”: Ultra low borrowing costs, tight supply and increased demand for single-family homes have created a crowded real estate market that is forcing many Canadians to change their financial planning strategies.

This includes baby boomers and Generation X investors who cash in on their investment properties and townhouses. Should we follow suit and if so, what to do with your real estate income?

“If the purpose of buying an investment property or a primary residence was to sell and fund your retirement, you have to ask yourself if it is going to be much better than that,” says David Semerak, consultant. main assets at Meridian Credit Union. “The answer – at least in the next couple of years – probably isn’t much, so I think it’s a good time, given what’s going on right now.”

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(An RBC Economics report released in mid-June predicts that the highest prices have yet to be reached. A much larger market rebalance before prices can stabilize. We expect this to happen. occur at the earliest this year. ”)

If you’ve decided to sell, now you need to decide what to do with your influx of money. Some reinvest these funds, often in stocks that pay dividends and / or investments that produce income. “People are avoiding GICs because of the low interest rates. They use this money to create a new source of income for themselves, ”explains Semerak.

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Others invest that money to buy a nicer, low-maintenance townhouse or condo. There is often not much of a price difference between the house they just sold and the one they buy, he reports. Still others help their adult children put down a big enough down payment on their own home that they don’t need mortgage insurance (remember, this is automatically included in your mortgage when you pay less. 20% for the purchase. The price).

Many millennials, on the other hand, choose not to follow in their parents’ footsteps when it comes to homeownership, at least for now. “The costs of home ownership are so heavy that, with a starting salary, almost 100% of your disposable income would be used to finance this mortgage,” explains Semerak. “Either they ask their parents for help, or they pull out and choose to spend their disposable income in another way. “

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Many are comfortable with renting or buying something other than a detached house, such as a condominium. Some share a mortgage with others who want to dip their stocks into the real estate market but don’t have enough money to do so on their own. “My only advice is to make sure you have an exit strategy defined if one of the co-owners decides to leave,” he says.

For those who choose to invest their hard-earned money to save for a down payment, the Tax-Free Savings Account is a “game changer,” Semerak explains. “This allows you to invest the disposable income in things like stocks, bonds and mutual funds as well as real estate investment trusts and other real estate type investments where you could be exposed to the market with a lot. less capital. “
Structure your investments properly and you could generate tax-free income that could potentially be used to pay rent or a mortgage.

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“The worst thing to do is to do nothing and the sooner you start, the better,” he says. “If you can get this started and make it part of your usual savings, you will be able to own home – maybe not as early as the generation before millennials, but as soon as possible. “

LATERAL BAR :

Rising prices across the country

Home prices across the country have increased dramatically over the past year, especially in Atlantic Canada and more recreational locations, according to Century 21 Canada’s fifth annual Price Per Square Foot survey.
The survey compares the price per square foot of properties sold this year between January 1 and June 30 compared to the same period last year.

10 most expensive areas per square foot

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1. Montreal, downtown and southwest (detached) $ 1,350
2. Vancouver, downtown: $ 1,310
3. Vancouver, west side: $ 1,208
4. Vancouver: $ 975
5. West Vancouver: $ 971
6. Toronto, downtown: $ 956
7. Montreal, downtown and southwest (townhouse): $ 937
8. Montreal, downtown and southwest (condo): $ 935
9. Vancouver, east side: $ 877
10. North Vancouver: $ 794

10 cheapest cities per square foot

1. Saint John, NB: $ 134
2. Moncton, NB: $ 142
3. Fredericton, NB: $ 147
4. St. John’s, Newfoundland. (detached): $ 149
5. High River, Alta. : $ 176
6. St. John’s, Newfoundland. (condo): $ 182
7. Red Deer, Alta. (condo): $ 186
8. Brandon, Man. : $ 203
9. Regina, Saskatchewan: $ 205
10. Red Deer, Alta. (townhouse): $ 207

Source: www.c21.ca/2021/08/11/price-per-square-foot-2021

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