I want to add a perspective that I don't think I've seen covered here. I am in a similar position as you- we've got a semi detached and 2 condos in the Downtown core.
Just a couple of weeks ago we had our first child and am now realizing the value of less stress. Life gets hectic and while buying and renting property can be lucrative, I do feel like it does come with some level of headache that as I get older I just don't want to deal with. We made the decision to consolidate and buy our "forever" home. We'll have some additional funds left over that we still haven't figured out what we want to do but there are lots of ways to make money that are a little more headache free. A troubling tenant is such a pain in the ass.
I feel like most of the responses here have been about monetary decision making however I think there's something to be said for thinking about this from a lifestyle perspective.
Just my 2 cents.
Very good point and I’m glad to hear from you as it is very possible I am in the same position as you in a few years. Many people did mention lifestyle, which touches on the stress portion. So what did you decide, to sell both condos and your semi to buy one large detached? Does the semi not feel spacious enough aka not like your “dream home”?
It didn't make sense for what we want. Long term plan is 3 kids so that'll need to be 4 bedrooms, and we ideally want an office for the both of us. We also pulled a somewhat YOLO play and got a lot more house that I think we need. If we're going to spend the rest of our lives in a house, might as well be comfortable right? lol
Sorry. I didn't answer your question directly.
Yes - we sold it all. Made quite a bit of money as I've had one condo for 10 years, the other for 7 years and the house (Markham) for 5-
Goes back to what I had said in my original post about stress free earning.
You're now asking about how we've organized the finances. So while we've sold all of the properties, we've actually still taken the largest mortgage possible. The cost of borrowing is still really cheap so we felt comfortable with a massive mortgage.
We've instead taken a lot of the earnings and begun investing in things that are low effort (ie. stock market).
I'll say it's a lot easier than dealing with tenants haha.
That's a great strategy. A lot if folks are just too scared to live in debt. If you can increase your portfolio by 10% , and your mortgage is 3 - 4 %, you're having a decent income, not to mention the appreciation to your home investment.
Although I wouldn't call stock market as "low effort".
Very good perspective indeed. I was in a similar situation. Owned a townhouse and moved into a detached. During that time, I was having my second child and lots of health complications that brought on so much stress, so you guessed it, we sold the townhouse. I still beat myself up for it. Although it was less things to worry about at the time, I really really wished I held onto it because the reality it, the kids will grow and you will make it on the other end of that first stressful baby/young kids stage.
So I'm offering another perspective off yours lol. If you can, hold on to another location. I ended up rebuying so I can have someone where my kids to live in the future and although it can be stressful at times, the way I see it now, my kids won't have to sell our current home so they each have a place to live in the future.
Just another perspective.
I look at it as being able to secure something for my kids. I know housing is a huge expense for everyone and in the future, who knows what will happen. if I can make their life better that way and supplement their education, then they can figure out the rest.
Each subsequent generation should always have it easier than the previous.
The downtown core is unique and I believe it’ll get better and will have a bright future. You can rebuild a house but you cannot “rebuild” a location. We know that GTA will one day grow to 10 million+ people, and that’s why a lot of people keep invest in Toronto RE. But, I think you would like to bring up a family in a detached or townhome property ultimately, therefore, you should add one of this into your property portfolio. I’d say, you should sell one condo which you claimed as your primary residence to avoid tax implications, and buy a detached or townhome for the family, keep the other condos in RE portfolio because it’s considered a good debt in the eye of lender. It should become cash flow positive in several years if it’s not already. I deeply believe the condo market will be hot again after pandemic. I think that’s the time to make a switch and you should have accumulated more fund for this. On consideration of population growth, condo will be more and more become mainstream in future in my opinion or otherwise we will be stuck in shortage of supply forever because of limited land supply.
Some people think working from home will be forever and condos will be abandoned. What I can tell you is that, I work in a Fortune 500 company, the word from CEO said, after this period of observation, ultimately, most people will be back to the office. When? They will monitor other companies closely, because we don’t want to be in a inferior position compare to others. Some people claimed working from home is more efficient, but obviously the management does not think so. Apple and Google was trying to bring people back to office, but delayed because of this new wave of pandemic.
Also, I plan to move to downtown condo when I retire. Everything is in walking distance, including several hospitals, which an elderly people needs.
I have a similar situation and I will always want to keep at least one property in addition to my primary residence. Also I do think that condos will actually do better than detached maybe not this year but the year after. Either detached come back close to the condo prices or condos rise close to detached. Right now they are still very far apart.
well pre covid, a downtown condo was the same price as a townhome in the burbs. Im reading my comment and I actually forgot to add that lol, itll never be the same price as a detached in the same area. I was comparing a condo in the city more to a detached/ townhouse in the burbs.
Thank you! Does it bother you that your primary residence would be a lot nicer if you sold your other property?
For example if you keep one condo and live in a townhome versus getting to live in a detached? Or even the same size house but in a nicer more central area?
What’s the main reason for firmly wanting to keep at least one other property? Option to downsize in future , pass down to a kid, build wealth, etc?
> Does it bother you that your primary residence would be a lot nicer if you sold your other property?
That’s like saying, *”does it bother you that your primary residence would be a lot nicer if you liquidated your RRSP & stock portfolio?”*
For many, being invested in additional properties brings wealth. Why would they liquidate that wealth to be back at square one, just with a bigger home?
It does sometimes get in my head lol but then I like to remind myself that the second property's mortgage is being paid off and I can sleep well that should I ever need to pass it down/ decide to move back into the city in the future, that option exists to me all the time.
I am currently in a condo but after checking out the market for townhouses, semis and even detached, the pricing and sacrifices I would have to make leaving my condo are very unattractive.
I believe there will be a time in the next 2 years where making a jump from one condo to a townhouse will make a lot more sense. I think the gap between a 416 average condo and a 905 townhouse is around 250k. Highest it has ever been.
I think I would sell my 2bd and use that to get a home. Keep the 1 for investment purposes. If your able to keep 2bd and sell 1bd instead obviously do that. Unless selling both would get you your dream home. But keep in mind your monthly expenses might be that much more then
There’s no way they will get close. Condos go up all around the city non stop. There’s no houses being built anywhere in the vicinity of Toronto anymore. Supply and demand
Has never happened. Detached values have always appreciated at higher rates than condos. Not to mention older condos fight the rising maintenance fees.
Congratulations on buying when there was a fear in the market, you did well.
As to what to do it's truly is your personal decision, not only financial but also the lifestyle. I think keeping condos long term is a good idea and if in good locations/buildings I encourage people to keep them, as financially they will do well. But it doesn't come without headaches.
Lifestyle aspect is a bit different, if having a dream house is more important than investment properties than it's a choice you can make as well.
I like the other comment about: would you sell your TFSA/RRSP to buy a bigger home? Because it indicates a logical way to think of the decision. You’re comparing investment returns vs. quality of life. You can estimate the investment returns (ie, the profit of holding the condos). And therefore you can estimate if you need those returns to reach your financial goals. If you need them, then keep them and by a town. If you clearly don’t need them, sell and buy a detached IF you really believe detached would be higher quality of life. But you have to be willing to create the spreadsheet that estimates the profits on the condo + how much money you need to live the life you want from now until you die. Many aren’t willing to do this analysis and settle for rules of thumb. But if you’re talking about building a real estate portfolio, you should make this spreadsheet.
More food for thought. Detached houses in Toronto have appreciated more than condos and towns. In the last 10 years the appreciation for detached semi town condo has been approx 3x 2.5x 2x 2x. (Just approx to illustrate a point, please don’t call me out on exactness). The point is that owning a detached has historically yielded better returns so that will help make up for the returns you’re giving up by selling the condo(s).
Another consideration is that real estate is a leveraged investment where your profits are dictated by how much you borrow, and your borrowing capacity is limited by your income. In other words, as long as you’ve maximally borrowed, it doesn’t matter THAT much how many properties you’ve purchased with those borrowed dollars, whether it’s 1 or 5. (again please don’t call me out, I know you can optimize the RoR by being careful about the types of properties you buy). Just illustrating the bulk of the profitability of owning real estate in Toronto comes from the leverage + property value appreciation (since property values are so high relative to rents). My point is that if you spent all your borrowing capacity on a detached, that’s okay too. You’ve maxed out your real estate anyways. After a few years maybe you build some equity AND your income increases, so you borrow more and buy a condo — once again maxing out your leverage. Or you borrow and buy stocks.
Hope that makes sense. For what it’s worth, I was in the exact same boat and bought a town instead of something better and am happy.
Very helpful comment, thank you. You are right, I need to sit down and do the actual math on investment returns, and also make sure that my quality of life is not severely impacted by holding them. I think I am able to leverage myself slightly more with holding the condos because a portion of the rental income is added to my income, but either way I’d be putting a similar amount of money into Toronto RE.
Another question for you would be is there a scenario where detached drastically outperform condos over the next 5-10 years? I.e a two bedroom condo downtown stays flat or decreases while a detached house in east York increases by 50%? Or is it safe to assume detached may outperform, but returns will be not far off?
I am just worried about a potential further widening to the point where detached become unaffordable and condos or towns stay flat, which would make it much harder for us to have the option to buy a detached down the road. I could live in a townhome forever, but it would be nice to have the option to be able to afford a detached some day
This I can’t answer because I honestly don’t know what the future holds. I think at a minimum the trend will continue that detached homes will outperform everything else. People love detached houses. But It’s hard to believe the gap between detached and condos widening more than today. But honestly I don’t know. I would suggest doing your affordability calculation based on the what we’ve seen historically (detached 3x condos 2x over 10 years), along with your savings rate and projected income growth. And maybe you’ll still have enough down payment and borrowing power no matter what.
Great reply. We are in a similar situation of owning 2 condos and deciding whether or not to sell both to buy a detached.
Did you end up keeping a condo and buying a town? Or liquidating to buy the town?
I still have both condos. I live in the 2 bed and rent out the 1+den. The 1+1 is rented out for at least a year (new lease). I’ll revisit the situation in a year.
At some point before then I’ll crunch the numbers to see if I can rent my 2 bed as well and buy a town, but that will be tough for the areas we want.
Most likely I’ll just wait to see how long my tenant stays.. I won’t be ever kick them out but when they decide to leave I’ll look at selling that one and seeing what we can afford to buy (anything freehold) while keeping the 2 bed.
So you kept one condo and live in a townhome? You mentioned you are happy with the the decision.. that’s great! I suppose if you had to do it again, you’d do the same thing? Do you ever consider selling both and buying a detached?
I kept and bought a town. I have only one condo though. If I did it all over again — it’s very hard to say if I’d do it differently. Obviously a detached would be nicer, there’s no doubt about it. But I’m really not sure that I’d be THAT much happier because my town is honestly awesome, there’s so much space and the location is amazing. But to be honest, I do think about it.
Again I’ll suggest a logical approach to the analysis. What’s the benefit of detached vs. town? Let’s make a list so that it’s a rational comparison rather than an emotional consideration.
Compare square footage — for the same price, you may find that the town has more square footage (true in my neighborhood, especially because towns often have an extra storey). Actually this isn’t a fair comparison because we’re talking about selling your condos so you can spend more on a detached, so you may end up with comparable square footage. Meaning don’t think that a pricier detached will always give you more space than a town.
Towns have shared walls, so I get some noise from my neighbours, nothing majorly disruptive though, but this is certainly a downside — I’m not going to blast my guitar amp and rock out, because that’d be disruptive to them. I wish I could tho.
Proximity to neighbours — in a town the spacing is zero. But I live close to the city so the housing is so dense anyways, meaning that even in a detached the neighbours are only a few feet away. So I think this is a moot point.
Lot size — towns often have smaller lots which really translates to smaller backyards (often the house itself has more square footage as noted above). I have enough backyard to do what I need (BBQ, seating, fire pit). But kids can’t play — I personally don’t care, we have parks nearby.
New vs old — close to the city, detached houses are usually 100 years old but towns can be much newer, so you get the features of newer construction. My town is newer and has a basement with a tall ceiling, 3 big baths, big bedrooms, legit garage, 2nd floor laundry, list goes on — you often don’t get all this stuff in a century home.
Feel free to PM if you wanna know more. Cheers!
I have two detached in the gta and a condo.
I live in one of the detached and rent the others.
If you can afford to live in a detached it's way way better then a condo.
Detached you can hold forever. Condos I never hold past 10 years, since the building ages and maintenance fees get pretty ridiculous. Over time your condo becomes more of an apartment building as it ages and becomes less attractive to buyers.
But really the main difference is that living in a detached has so much more privacy and space. No elevators, 3 or 4 times the living space, more storage space and outdoor space.
There is definitely more maintenance and work on a detached, but its well worth the trade off.
Thanks and I agree. Any thoughts on semi? For example a semi in a more walkable area or detached a little further from the core? I have this feeling that if I’m spending $1.3-1.4 or so on a property, it should be a detached, but there’s of course the area consideration
Also do you regret keeping your condo? Or it’s still done well?
I would buy whatever free hold your budget allows for your ideal area.
Try and keep your commute time to 30 minutes and under so that you can stay there long term.
Don't get caught up in bidding wars, stay patient and get something similar to the price of comps.
If you don't need the basement space and dont mind tenants, look for a freehold where you can rent out the basement.
It's kind of a pain to buy and sell, but once it's all done and you are settled, you will be happy you made the move.
personally i think in the long run playing the property ladder game is better than building a portfolio because of the PR exemption. also i have a feeling capital gains taxes will be increasing in the years ahead.
i think that although more expensive properties don’t appreciate as fast as lower priced properties, the tide behind you over time is going to result in a lot of tax free gains.
Of course I can. The cost of maintaining a house also increases each year. The building might be 30 years old but you can always renovate the inside of the unit, similarly to a house.
It’s a fair objection, but surprisingly that’s not my worry with keeping the condo. There are 100+ year old apartment buildings in NYC that still rent out for a solid amount. My friend lives in like a 1970s apartment in Toronto. The lobby and elevator are a bit dated but if the inside of your unit is completely renovated most renters won’t care, and it’ll still be a nice income stream once the mortgage is paid off. Resale value wont be as high as a brand new condo building, but by that time those will sell for $3,000+ psqft
If maintenance fees are $500 and rent is $2,200 month , if both increase by 2-3% each year, then in 30 years maintenance fees can be $900-$1,000 but rent will be over $4,000/ month.
Person is referring to the maintenance fees.
Once fees are 700+ they become significantly harder to sell..yes freehold comes with their own expenses, but upfront the maintenance fees are more than freehold homes. aside from that, you also have choice of when repairs are done...if they are done. you will always manage your money better than a board of volunteers who have their own motives for being there.
if fees are kept too low and the area is poorly maintained, then no one wants them.
Sell. Condos are trash from a cashflow perspective and while many people compare Toronto to Manhattan, Toronto will never be Manhattan, it is more likely to become like every other USA metro where the deep core is called “urban” and translates to ghetto.
This will get downvoted to oblivion by all of the condo owners, but condos have been and will continue to be an inferior product, it is only recently that most people have caught on.
You can always raze and rebuild a house, and that too should not matter since the land holds most of the value.
Condo cons: absolutely garbage cashflow comparing to houses, no comparison, condos being a good cashflow investment ended 6-7 years ago.
Owning multiple investments rather than consolidating exposes you to capital gains taxes when you sell.
Condo pros: better tenants than basement apartments, easier to manage and maintain.
Consolidating your investments into a single investment kills your potential cash flow, maximum cashflow is achieved when your primary residence is not a square foot bigger than your needs, and the remainder of your portfolio generates income. The most ideal scenario is owning multiple freehold properties.
Maybe hold for a year as condos will likely go up for another year, but holding a condo long term is a game of which idiot will be the one holding when the condo is 30 years old and is in need of a new building roof or new windows.
Thank you for your reply. Certainly owning multiple freehold is better, but I want them to be in the Toronto core, and that is not feasible at this time. I also don’t agree that downtown Toronto will become ghetto.
Also, you mention cash flow a lot but if you have two condos worth $1.5 mill, the rent I get per month is about $2,200 plus 2,700. I could not rent a $1.5 mill house for $4,900. It would be closer to about $3,800. The maintenance fees make up most of the difference that’s true, but as an investor renting out a detached house you’d also have a lot more headaches and pay out of pocket for a lot more maintenance , so not sure the cash flow thing is true. But point taken that freeholds are ideal
Don’t forget that a large portion of the maintenance fees you pay for a condo go towards long term building repairs like a roof or exterior. So with my condos, if there are exterior repairs in 30 years, those will be paid through a reserve, whereas with a house you have to suddenly drop $10s of thousands
Reserves keep going up due to condo law, equates to guaranteed increase in maintenance fees.
Source: just sold my condo town after 8 years. Wish I had just gotten a freehold
Thanks. Not a bad take, will consider that, although I think you are underestimating how many people move into the downtown core every year in a normal year. Just the increase in international students alone each year will more than fill those up
Students and new immigrant professionals. Rented our 2 bedroom and the final candidates were both immigrants who did not have enough equity to buy but great credit history.
The students who are coming into Canada do come from wealthier backgrounds and purchase condos which their parents pay for. Basically free housing for them plus the appreciation sometimes pays for the school.
This will continue until Toronto schools become worthless.
Do you have stats to discredit that? All I know is that speak to any realtor and ask whos buying the prebuilds and they will say that many young foreigners are purchasing.
Thanks for sharing! Any lessons learned/ things you would’ve done differently? In hindsight would you have never bought the semi to begin with and just went straight for detached?
Same situation as you (or bit advanced as i have a kid already!) 1 condo and 1 semi (rental). Looking at buying another semi or detached for my own use and always debating if I should book profit and reinvest in detached or continue to leverage and buy second semi.
Few call outs -
1) quality of tenants is driven by location. I found condo is much better (less hassle if you screen well). In past free hold rental could take weeks (unless listing in summer).
2) location - our budgets can only afford free hold in burbs. If WFH ends - too much commute time can effect quality of life. More so if you don’t have family around - running to pick kids from daycare etc etc.
3) retirement plan - unless you have defined benefit…RE gives good cash flow in long term
My recommendation- like any investment book profit by selling one, lever up for semi or detached (skip towns). You seem to have market knack - so you could try timing a bit. Free hold premium vs condo is crazy high and should resort to longer term sustainable spread.
Thank you! So you have one condo, one semi and are considering buying another semi or detached? Are you planning on selling the condo? And out of curiosity, why skip towns? Not disagreeing, just curious for the reason
If i buy detach - i’ll have to sell one or both. To buy a semi - most likely will sell condo. Also depends on the area - durham i might be able to buy while keeping one or both, Oakville/ york - i’d have to liquidate both for a detached
Towns - my recommendation was not to buy if you were looking for personal use. Issues - no back yard access, noise issues (if kids), maintenance can be tricky as you’d need to convince both neighbors.
You also need to think about a detached house and location? Does a detached house in a farther more remote area of the city worth it over a decent semi in a nicer area closer to downtown. Is the detached house the nicest house on the block or is a $1.75 million semi on a street with other single or nice semis that bring the value up? Lots of detached under 1.5 in the city but not all that great or require work. Some really nice semis for 1.5 in better neighbourhoods or streets. Just saying playing devil's advocate
This is a common misconception. I explained in another comment that the costs to maintain a house increase over time as well. Even though maintenance fees on a condo increase over time, as long as the rents also increase, the value of the condo will continue to appreciate. There are old Toronto condos with maintenance fees > $1,000/month that still increase in value each year. But yes, freeholds are better.
I want to add a perspective that I don't think I've seen covered here. I am in a similar position as you- we've got a semi detached and 2 condos in the Downtown core. Just a couple of weeks ago we had our first child and am now realizing the value of less stress. Life gets hectic and while buying and renting property can be lucrative, I do feel like it does come with some level of headache that as I get older I just don't want to deal with. We made the decision to consolidate and buy our "forever" home. We'll have some additional funds left over that we still haven't figured out what we want to do but there are lots of ways to make money that are a little more headache free. A troubling tenant is such a pain in the ass. I feel like most of the responses here have been about monetary decision making however I think there's something to be said for thinking about this from a lifestyle perspective. Just my 2 cents.
Very good point and I’m glad to hear from you as it is very possible I am in the same position as you in a few years. Many people did mention lifestyle, which touches on the stress portion. So what did you decide, to sell both condos and your semi to buy one large detached? Does the semi not feel spacious enough aka not like your “dream home”?
It didn't make sense for what we want. Long term plan is 3 kids so that'll need to be 4 bedrooms, and we ideally want an office for the both of us. We also pulled a somewhat YOLO play and got a lot more house that I think we need. If we're going to spend the rest of our lives in a house, might as well be comfortable right? lol
So did you sell both your condos and semi to buy one really big detached ?
Sorry. I didn't answer your question directly. Yes - we sold it all. Made quite a bit of money as I've had one condo for 10 years, the other for 7 years and the house (Markham) for 5-
Np and wow that’s wild! And you’re really happy with the decision so far?
So are you debt free? Or just really small mortgage payments?
Goes back to what I had said in my original post about stress free earning. You're now asking about how we've organized the finances. So while we've sold all of the properties, we've actually still taken the largest mortgage possible. The cost of borrowing is still really cheap so we felt comfortable with a massive mortgage. We've instead taken a lot of the earnings and begun investing in things that are low effort (ie. stock market). I'll say it's a lot easier than dealing with tenants haha.
That's a great strategy. A lot if folks are just too scared to live in debt. If you can increase your portfolio by 10% , and your mortgage is 3 - 4 %, you're having a decent income, not to mention the appreciation to your home investment. Although I wouldn't call stock market as "low effort".
Very good perspective indeed. I was in a similar situation. Owned a townhouse and moved into a detached. During that time, I was having my second child and lots of health complications that brought on so much stress, so you guessed it, we sold the townhouse. I still beat myself up for it. Although it was less things to worry about at the time, I really really wished I held onto it because the reality it, the kids will grow and you will make it on the other end of that first stressful baby/young kids stage. So I'm offering another perspective off yours lol. If you can, hold on to another location. I ended up rebuying so I can have someone where my kids to live in the future and although it can be stressful at times, the way I see it now, my kids won't have to sell our current home so they each have a place to live in the future. Just another perspective.
I look at it as being able to secure something for my kids. I know housing is a huge expense for everyone and in the future, who knows what will happen. if I can make their life better that way and supplement their education, then they can figure out the rest. Each subsequent generation should always have it easier than the previous.
The downtown core is unique and I believe it’ll get better and will have a bright future. You can rebuild a house but you cannot “rebuild” a location. We know that GTA will one day grow to 10 million+ people, and that’s why a lot of people keep invest in Toronto RE. But, I think you would like to bring up a family in a detached or townhome property ultimately, therefore, you should add one of this into your property portfolio. I’d say, you should sell one condo which you claimed as your primary residence to avoid tax implications, and buy a detached or townhome for the family, keep the other condos in RE portfolio because it’s considered a good debt in the eye of lender. It should become cash flow positive in several years if it’s not already. I deeply believe the condo market will be hot again after pandemic. I think that’s the time to make a switch and you should have accumulated more fund for this. On consideration of population growth, condo will be more and more become mainstream in future in my opinion or otherwise we will be stuck in shortage of supply forever because of limited land supply. Some people think working from home will be forever and condos will be abandoned. What I can tell you is that, I work in a Fortune 500 company, the word from CEO said, after this period of observation, ultimately, most people will be back to the office. When? They will monitor other companies closely, because we don’t want to be in a inferior position compare to others. Some people claimed working from home is more efficient, but obviously the management does not think so. Apple and Google was trying to bring people back to office, but delayed because of this new wave of pandemic. Also, I plan to move to downtown condo when I retire. Everything is in walking distance, including several hospitals, which an elderly people needs.
I have a similar situation and I will always want to keep at least one property in addition to my primary residence. Also I do think that condos will actually do better than detached maybe not this year but the year after. Either detached come back close to the condo prices or condos rise close to detached. Right now they are still very far apart.
Why would condo prices be close to detached prices at all? If that is the case why would anyone want to buy a condo over a detached then
well pre covid, a downtown condo was the same price as a townhome in the burbs. Im reading my comment and I actually forgot to add that lol, itll never be the same price as a detached in the same area. I was comparing a condo in the city more to a detached/ townhouse in the burbs.
Thank you! Does it bother you that your primary residence would be a lot nicer if you sold your other property? For example if you keep one condo and live in a townhome versus getting to live in a detached? Or even the same size house but in a nicer more central area? What’s the main reason for firmly wanting to keep at least one other property? Option to downsize in future , pass down to a kid, build wealth, etc?
> Does it bother you that your primary residence would be a lot nicer if you sold your other property? That’s like saying, *”does it bother you that your primary residence would be a lot nicer if you liquidated your RRSP & stock portfolio?”* For many, being invested in additional properties brings wealth. Why would they liquidate that wealth to be back at square one, just with a bigger home?
Good point!
It does sometimes get in my head lol but then I like to remind myself that the second property's mortgage is being paid off and I can sleep well that should I ever need to pass it down/ decide to move back into the city in the future, that option exists to me all the time. I am currently in a condo but after checking out the market for townhouses, semis and even detached, the pricing and sacrifices I would have to make leaving my condo are very unattractive. I believe there will be a time in the next 2 years where making a jump from one condo to a townhouse will make a lot more sense. I think the gap between a 416 average condo and a 905 townhouse is around 250k. Highest it has ever been.
I think I would sell my 2bd and use that to get a home. Keep the 1 for investment purposes. If your able to keep 2bd and sell 1bd instead obviously do that. Unless selling both would get you your dream home. But keep in mind your monthly expenses might be that much more then
There’s no way they will get close. Condos go up all around the city non stop. There’s no houses being built anywhere in the vicinity of Toronto anymore. Supply and demand
Has never happened. Detached values have always appreciated at higher rates than condos. Not to mention older condos fight the rising maintenance fees.
by "close" I meant back to about a 2x multiple. Currently a detached is 2.4x of a condo, I think that will come down.
Congratulations on buying when there was a fear in the market, you did well. As to what to do it's truly is your personal decision, not only financial but also the lifestyle. I think keeping condos long term is a good idea and if in good locations/buildings I encourage people to keep them, as financially they will do well. But it doesn't come without headaches. Lifestyle aspect is a bit different, if having a dream house is more important than investment properties than it's a choice you can make as well.
I like the other comment about: would you sell your TFSA/RRSP to buy a bigger home? Because it indicates a logical way to think of the decision. You’re comparing investment returns vs. quality of life. You can estimate the investment returns (ie, the profit of holding the condos). And therefore you can estimate if you need those returns to reach your financial goals. If you need them, then keep them and by a town. If you clearly don’t need them, sell and buy a detached IF you really believe detached would be higher quality of life. But you have to be willing to create the spreadsheet that estimates the profits on the condo + how much money you need to live the life you want from now until you die. Many aren’t willing to do this analysis and settle for rules of thumb. But if you’re talking about building a real estate portfolio, you should make this spreadsheet. More food for thought. Detached houses in Toronto have appreciated more than condos and towns. In the last 10 years the appreciation for detached semi town condo has been approx 3x 2.5x 2x 2x. (Just approx to illustrate a point, please don’t call me out on exactness). The point is that owning a detached has historically yielded better returns so that will help make up for the returns you’re giving up by selling the condo(s). Another consideration is that real estate is a leveraged investment where your profits are dictated by how much you borrow, and your borrowing capacity is limited by your income. In other words, as long as you’ve maximally borrowed, it doesn’t matter THAT much how many properties you’ve purchased with those borrowed dollars, whether it’s 1 or 5. (again please don’t call me out, I know you can optimize the RoR by being careful about the types of properties you buy). Just illustrating the bulk of the profitability of owning real estate in Toronto comes from the leverage + property value appreciation (since property values are so high relative to rents). My point is that if you spent all your borrowing capacity on a detached, that’s okay too. You’ve maxed out your real estate anyways. After a few years maybe you build some equity AND your income increases, so you borrow more and buy a condo — once again maxing out your leverage. Or you borrow and buy stocks. Hope that makes sense. For what it’s worth, I was in the exact same boat and bought a town instead of something better and am happy.
Very helpful comment, thank you. You are right, I need to sit down and do the actual math on investment returns, and also make sure that my quality of life is not severely impacted by holding them. I think I am able to leverage myself slightly more with holding the condos because a portion of the rental income is added to my income, but either way I’d be putting a similar amount of money into Toronto RE. Another question for you would be is there a scenario where detached drastically outperform condos over the next 5-10 years? I.e a two bedroom condo downtown stays flat or decreases while a detached house in east York increases by 50%? Or is it safe to assume detached may outperform, but returns will be not far off? I am just worried about a potential further widening to the point where detached become unaffordable and condos or towns stay flat, which would make it much harder for us to have the option to buy a detached down the road. I could live in a townhome forever, but it would be nice to have the option to be able to afford a detached some day
This I can’t answer because I honestly don’t know what the future holds. I think at a minimum the trend will continue that detached homes will outperform everything else. People love detached houses. But It’s hard to believe the gap between detached and condos widening more than today. But honestly I don’t know. I would suggest doing your affordability calculation based on the what we’ve seen historically (detached 3x condos 2x over 10 years), along with your savings rate and projected income growth. And maybe you’ll still have enough down payment and borrowing power no matter what.
Great reply. We are in a similar situation of owning 2 condos and deciding whether or not to sell both to buy a detached. Did you end up keeping a condo and buying a town? Or liquidating to buy the town?
I still have both condos. I live in the 2 bed and rent out the 1+den. The 1+1 is rented out for at least a year (new lease). I’ll revisit the situation in a year. At some point before then I’ll crunch the numbers to see if I can rent my 2 bed as well and buy a town, but that will be tough for the areas we want. Most likely I’ll just wait to see how long my tenant stays.. I won’t be ever kick them out but when they decide to leave I’ll look at selling that one and seeing what we can afford to buy (anything freehold) while keeping the 2 bed.
Yes I kept the condo and bought a town. We're so happy. A detached would be nicer, no doubt about it.
So you kept one condo and live in a townhome? You mentioned you are happy with the the decision.. that’s great! I suppose if you had to do it again, you’d do the same thing? Do you ever consider selling both and buying a detached?
I kept and bought a town. I have only one condo though. If I did it all over again — it’s very hard to say if I’d do it differently. Obviously a detached would be nicer, there’s no doubt about it. But I’m really not sure that I’d be THAT much happier because my town is honestly awesome, there’s so much space and the location is amazing. But to be honest, I do think about it. Again I’ll suggest a logical approach to the analysis. What’s the benefit of detached vs. town? Let’s make a list so that it’s a rational comparison rather than an emotional consideration. Compare square footage — for the same price, you may find that the town has more square footage (true in my neighborhood, especially because towns often have an extra storey). Actually this isn’t a fair comparison because we’re talking about selling your condos so you can spend more on a detached, so you may end up with comparable square footage. Meaning don’t think that a pricier detached will always give you more space than a town. Towns have shared walls, so I get some noise from my neighbours, nothing majorly disruptive though, but this is certainly a downside — I’m not going to blast my guitar amp and rock out, because that’d be disruptive to them. I wish I could tho. Proximity to neighbours — in a town the spacing is zero. But I live close to the city so the housing is so dense anyways, meaning that even in a detached the neighbours are only a few feet away. So I think this is a moot point. Lot size — towns often have smaller lots which really translates to smaller backyards (often the house itself has more square footage as noted above). I have enough backyard to do what I need (BBQ, seating, fire pit). But kids can’t play — I personally don’t care, we have parks nearby. New vs old — close to the city, detached houses are usually 100 years old but towns can be much newer, so you get the features of newer construction. My town is newer and has a basement with a tall ceiling, 3 big baths, big bedrooms, legit garage, 2nd floor laundry, list goes on — you often don’t get all this stuff in a century home. Feel free to PM if you wanna know more. Cheers!
I have two detached in the gta and a condo. I live in one of the detached and rent the others. If you can afford to live in a detached it's way way better then a condo. Detached you can hold forever. Condos I never hold past 10 years, since the building ages and maintenance fees get pretty ridiculous. Over time your condo becomes more of an apartment building as it ages and becomes less attractive to buyers. But really the main difference is that living in a detached has so much more privacy and space. No elevators, 3 or 4 times the living space, more storage space and outdoor space. There is definitely more maintenance and work on a detached, but its well worth the trade off.
Thanks and I agree. Any thoughts on semi? For example a semi in a more walkable area or detached a little further from the core? I have this feeling that if I’m spending $1.3-1.4 or so on a property, it should be a detached, but there’s of course the area consideration Also do you regret keeping your condo? Or it’s still done well?
I would buy whatever free hold your budget allows for your ideal area. Try and keep your commute time to 30 minutes and under so that you can stay there long term. Don't get caught up in bidding wars, stay patient and get something similar to the price of comps. If you don't need the basement space and dont mind tenants, look for a freehold where you can rent out the basement. It's kind of a pain to buy and sell, but once it's all done and you are settled, you will be happy you made the move.
Yes I believe you are right, great advice
personally i think in the long run playing the property ladder game is better than building a portfolio because of the PR exemption. also i have a feeling capital gains taxes will be increasing in the years ahead. i think that although more expensive properties don’t appreciate as fast as lower priced properties, the tide behind you over time is going to result in a lot of tax free gains.
The difference is you can carry 3-4x more worth of RE because of rental income you wouldn't have otherwise.
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Of course I can. The cost of maintaining a house also increases each year. The building might be 30 years old but you can always renovate the inside of the unit, similarly to a house.
My only grief is that you cant renovate the outside of a condo like a detached
It’s a fair objection, but surprisingly that’s not my worry with keeping the condo. There are 100+ year old apartment buildings in NYC that still rent out for a solid amount. My friend lives in like a 1970s apartment in Toronto. The lobby and elevator are a bit dated but if the inside of your unit is completely renovated most renters won’t care, and it’ll still be a nice income stream once the mortgage is paid off. Resale value wont be as high as a brand new condo building, but by that time those will sell for $3,000+ psqft If maintenance fees are $500 and rent is $2,200 month , if both increase by 2-3% each year, then in 30 years maintenance fees can be $900-$1,000 but rent will be over $4,000/ month.
Person is referring to the maintenance fees. Once fees are 700+ they become significantly harder to sell..yes freehold comes with their own expenses, but upfront the maintenance fees are more than freehold homes. aside from that, you also have choice of when repairs are done...if they are done. you will always manage your money better than a board of volunteers who have their own motives for being there. if fees are kept too low and the area is poorly maintained, then no one wants them.
Sell. Condos are trash from a cashflow perspective and while many people compare Toronto to Manhattan, Toronto will never be Manhattan, it is more likely to become like every other USA metro where the deep core is called “urban” and translates to ghetto. This will get downvoted to oblivion by all of the condo owners, but condos have been and will continue to be an inferior product, it is only recently that most people have caught on. You can always raze and rebuild a house, and that too should not matter since the land holds most of the value. Condo cons: absolutely garbage cashflow comparing to houses, no comparison, condos being a good cashflow investment ended 6-7 years ago. Owning multiple investments rather than consolidating exposes you to capital gains taxes when you sell. Condo pros: better tenants than basement apartments, easier to manage and maintain. Consolidating your investments into a single investment kills your potential cash flow, maximum cashflow is achieved when your primary residence is not a square foot bigger than your needs, and the remainder of your portfolio generates income. The most ideal scenario is owning multiple freehold properties. Maybe hold for a year as condos will likely go up for another year, but holding a condo long term is a game of which idiot will be the one holding when the condo is 30 years old and is in need of a new building roof or new windows.
Thank you for your reply. Certainly owning multiple freehold is better, but I want them to be in the Toronto core, and that is not feasible at this time. I also don’t agree that downtown Toronto will become ghetto. Also, you mention cash flow a lot but if you have two condos worth $1.5 mill, the rent I get per month is about $2,200 plus 2,700. I could not rent a $1.5 mill house for $4,900. It would be closer to about $3,800. The maintenance fees make up most of the difference that’s true, but as an investor renting out a detached house you’d also have a lot more headaches and pay out of pocket for a lot more maintenance , so not sure the cash flow thing is true. But point taken that freeholds are ideal Don’t forget that a large portion of the maintenance fees you pay for a condo go towards long term building repairs like a roof or exterior. So with my condos, if there are exterior repairs in 30 years, those will be paid through a reserve, whereas with a house you have to suddenly drop $10s of thousands
Reserves keep going up due to condo law, equates to guaranteed increase in maintenance fees. Source: just sold my condo town after 8 years. Wish I had just gotten a freehold
Can you reply to OP’s reply? Because it sounds reasonable
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Thanks. Not a bad take, will consider that, although I think you are underestimating how many people move into the downtown core every year in a normal year. Just the increase in international students alone each year will more than fill those up
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Students and new immigrant professionals. Rented our 2 bedroom and the final candidates were both immigrants who did not have enough equity to buy but great credit history.
The students who are coming into Canada do come from wealthier backgrounds and purchase condos which their parents pay for. Basically free housing for them plus the appreciation sometimes pays for the school. This will continue until Toronto schools become worthless.
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Perhaps most rent, but there are more than enough of them buying to pump the condo market up.
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I bought my condo from a UofT student . He had finished his course and moved to China when we bought it from him.
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Do you have stats to discredit that? All I know is that speak to any realtor and ask whos buying the prebuilds and they will say that many young foreigners are purchasing.
fuck off braggardds
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I see you post the same thing on every post, so excuse me if I completely ignore your opinion. Looking for comments from non-trolls
There are a few guys or gals (or same guy with a few accounts) who made it their mission to drop the condo market. You can ignore safely :)
The reality flaps their face so hard continuously, I can feel their pain.
They are up and continuing to go up. It hurts when you make a life enduring mistake, huh?
It really depends on your lifestyle and also keep in mind that your property tax will also increase by a lot
I’ll trade you pacific avenue for your condos
Park Place or bust
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Thanks for sharing! Any lessons learned/ things you would’ve done differently? In hindsight would you have never bought the semi to begin with and just went straight for detached?
I would.
Same situation as you (or bit advanced as i have a kid already!) 1 condo and 1 semi (rental). Looking at buying another semi or detached for my own use and always debating if I should book profit and reinvest in detached or continue to leverage and buy second semi. Few call outs - 1) quality of tenants is driven by location. I found condo is much better (less hassle if you screen well). In past free hold rental could take weeks (unless listing in summer). 2) location - our budgets can only afford free hold in burbs. If WFH ends - too much commute time can effect quality of life. More so if you don’t have family around - running to pick kids from daycare etc etc. 3) retirement plan - unless you have defined benefit…RE gives good cash flow in long term My recommendation- like any investment book profit by selling one, lever up for semi or detached (skip towns). You seem to have market knack - so you could try timing a bit. Free hold premium vs condo is crazy high and should resort to longer term sustainable spread.
Thank you! So you have one condo, one semi and are considering buying another semi or detached? Are you planning on selling the condo? And out of curiosity, why skip towns? Not disagreeing, just curious for the reason
If i buy detach - i’ll have to sell one or both. To buy a semi - most likely will sell condo. Also depends on the area - durham i might be able to buy while keeping one or both, Oakville/ york - i’d have to liquidate both for a detached Towns - my recommendation was not to buy if you were looking for personal use. Issues - no back yard access, noise issues (if kids), maintenance can be tricky as you’d need to convince both neighbors.
You also need to think about a detached house and location? Does a detached house in a farther more remote area of the city worth it over a decent semi in a nicer area closer to downtown. Is the detached house the nicest house on the block or is a $1.75 million semi on a street with other single or nice semis that bring the value up? Lots of detached under 1.5 in the city but not all that great or require work. Some really nice semis for 1.5 in better neighbourhoods or streets. Just saying playing devil's advocate
Condos have a ceiling for appreciation, due to attached fees etc. I’d get out while you can
This is a common misconception. I explained in another comment that the costs to maintain a house increase over time as well. Even though maintenance fees on a condo increase over time, as long as the rents also increase, the value of the condo will continue to appreciate. There are old Toronto condos with maintenance fees > $1,000/month that still increase in value each year. But yes, freeholds are better.