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Two years into the pandemic and the exodus out of Toronto continues. With so many people now permanently working from home and Toronto home prices at historical highs, it’s not a big surprise to see people continuing to choose suburban or rural life over urban.

So if you’re moving out of Toronto, should you sell your current home or rent it out and hold? 

Below, we compare the benefits and risks of selling vs. renting:

Selling Instead of Renting

Pros

  • Living mortgage-free If you’ve owned your Toronto house for a while, you likely have quite a bit of equity in your home, between the mortgage payments you’ve made and the way prices have increased, you may be able to cash out and live mortgage-free in a smaller, more affordable community. 
  • You can buy a kickass property somewhere else If living mortgage-free isn’t your goal, you could also choose to buy a much bigger and better home on a much bigger lot elsewhere. Some of our clients who’ve left Toronto in the last few years now live on multi-acre lots and have pools and 5,000 sqft houses – and their mortgage payment didn’t change. Some of those who moved out east or down south even have ocean views! 
  • Being a landlord is J-O-B, so you can save yourself a lot of hassles by simply moving on. Avoid 11 PM calls from tenants with a clogged toilet and issues collecting rent. 
  • It’s a 1,000 times easier to sell a home without a tenant living in it. If you own it, you can stage it, take great photos and allow potential buyers to see it at any time. If it’s rented? You’ll have so many more things to consider (including the fact that you can’t just kick the tenants out because you’re selling it). We wrote about Selling a Tenanted Property here. 

Cons

  • If you exit the Toronto real estate market and sell your property, will you be able to get back in it if you decide to move back to the city? Torontonians who sold in 2020 would, on average, need to spend $400,000 more to buy their old house back in 2022. 
  • What if you hate your new digs? The fantasy of living in a small town or in a rural location doesn’t always match reality and in non-pandemic times, it can take a loooong time to sell a property. The home I own in Prince Edward County was on the market for 360 days before I bought it. Renting out your Toronto home for a short period of time while you transition gives you the freedom to return.  You can read more about what to expect when moving to rural Ontario here.

Renting and Holding Instead of Selling

Pros

  • $$$$ Renting out your home instead of selling it means you’ll continue to hold real estate in one of the best and hottest real estate markets in the world. If prices continue to increase, you’ll benefit from the appreciation of the value of your house – and the rent will increase how much equity you have in it.
  • You can always move back – Well technically, you can’t move back in during the term of the lease, but if things don’t work in your life plan, you can give the tenant 60 days notice of your intention to move once the lease is over. 

Cons

  • Maintenance and repairs don’t end just because you aren’t living in it. That’ll take time and money. 
  • Capital Gains Taxes In Canada, you can only have one permanent residence when it comes to taxes, so when you start renting it out, you’ll have to pay capital gains on the increase in value of the property while it’s tenanted. Make sure to get an appraisal when you move out so you have proof of how much it was worth when it became an investment property. 
  • Income Taxes The rent you collect is considered income, so it will be added to the income you earn from your job and you’ll have to pay taxes on it. The good news is you’ll be able to write off any expenses, including the interest portion of your mortgage. You can read more about taxes here. 
  • It’s a lot harder to sell a tenanted property if you decide to sell it in the future. If you sell during the term of a lease, the new owner will inherit the tenant and won’t be able to move in themselves until the lease expires, substantially reducing your pool of Buyers. And while it’s for sale, you won’t be able to stage it and may encounter push-back when it comes to photography. Showing the home will also be more complicated as you’ll have to give the tenant 24 hours notice and you can’t insist they leave the property during the showing.

We continue to help Toronto homeowners make this important decision. Thinking of moving out of the city and aren’t sure if you should sell or rent? We’d be happy to chat!

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