Is It Time To Sell Your Investment Condo? - Part One
If you’re a condo investor in the GTA, you’ve likely watched the real estate market in the past year and wondered: Should I sell my investment property this year? As with most real estate decisions, there isn’t a one-size-fits-all answer. Here’s what you need to consider:
Interest Rates Are Higher – and So Is Your Mortgage Payment
Real estate investors are feeling the pinch of the TEN – yes ten! – interest rate hikes of the past 16 months. For variable mortgage holders, it’s meant higher monthly payments, while investors with fixed-rate mortgages have seen their amortization periods extended. And when that mortgage comes up for renewal? Well, let’s just say, it’s not fun.
Make sure you know how interest rates are impacting your mortgage and explore your renewal options early, so that you can plan accordingly. Re-evaluate your goals:
• Does your investment still make sense if your $ 2,000-a-month mortgage payment increases to $3,000 a month on renewal?
• If more of your mortgage payment is going towards interest instead of paying off the mortgage principle, how is your goal of building equity impacted?
How’s Your Cash Flow?
Experts estimate that more than 50% of GTA condo investors are losing money each month. In fact, a recent report by Urbanation and CIBC Capital Markets showed that 14% of investors were losing $1,000 or more a month, and 33% were down at least $400 a month.Condo owners have been impacted by higher interest rates and mortgage costs and increases in property tax, utility and maintenance costs. If you’re a seasoned investor, you know that cash flow isn’t the only way to make money on an investment property – especially in the GTA. Over time, your tenant helps you build equity by paying off your mortgage and hopefully, your property is increasing in value too. But it’s still important to understand your net cash flow and risk tolerance.
• How much of a higher mortgage payment can you absorb? If you have a variable-rate mortgage, you’ve likely already seen your payment increase substantially. How much is too much?
• Can you afford the new payments if your fixed-rate mortgage is coming up for renewal?
• What happens if you lose your job or the income that is helping you counter the negative cash flow? How will you afford the payments?
• Do you have a Plan B if your tenant doesn’t pay rent next month?
These are just some of the questions you should ask yourself when considering if now is the right time to sell your investment condo.
Stay tuned for next week where we dive deeper on other questions you can ask, and what to do!
Thanks for reading today’s BLOG!!!
Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
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