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We don’t have a crystal ball – but we do watch trends and talk to real estate investors every day. Here are 5 reasons to sell – and 5 reasons to hold – your investment property:
5 Reasons to Sell Your Investment Property Right Now:
1. Toronto’s rental market was one of the early casualties of the pandemic, with rents decreasing more than 5% from March 2020 to June 2020.
With four times more rental listings on the market in central Toronto than usual, the days of quickly getting multiple offers have been replaced with asking price reductions and s longer time on market. Some Tenants are seizing the opportunity to move to bigger/better spaces for less money, leaving Landlords to re-rent their spaces for less than what they were getting (and in some cases, at a loss compared to their monthly carrying costs). We’ve also been hearing about existing Tenants negotiating rent reductions to correspond to new market rents.
2. Being a Landlord in Ontario has never been easy
…and it got exponentially harder during the pandemic. Job losses affected many people’s ability to pay rent (or full rent) and some unscrupulous Tenants took advantage of the ban on evictions to continue pre-pandemic bad behaviour. I applaud the Landlords who worked with the tenants who suffered job losses – but your costs have likely continued. If it’s causing financial strain, it might be time to sell.
3. Your investment time-frame is short.
Most experts predict that the world economy will be on a roller coaster for the next few years and investors will need to think long-term in order to withstand the ride. If the uncertainty will keep you up at night or you’ll need access to the equity in the short term, you may want to consider selling sooner rather than later.
4. You were operating an Airbnb and are now trying to rent it to a full-time Tenant.
When the pandemic hit, the Toronto market was flooded with furnished rentals – former Airbnb’s unable to operate during the lockdown. Long-term rentals won’t fetch anywhere near the dollars you were bringing in with your Airbnb, and you may surprised to learn that your furnishings won’t bring in much additional rent (and in fact, may make it harder to find a Tenant). And: managing a property with a long-term Tenant in it is MUCH different than operating an Airbnb (and not necessarily easier). Owning a dedicated Airbnb is high risk/high reward – and the risk part is outweighing the reward part for many hosts these days.
5. You’ve lost your job or have otherwise been negatively impacted by COVID and need the cash.
You aren’t alone – a lot of people are finding themselves in surprising financial predicaments. If you don’t anticipate things getting better, it’s better to sell your investment property before you get desperate.
Reasons to Keep Your Investment Property Right Now:
1. You’re playing the long-game.
If real estate prices end up decreasing because of the pandemic, we know from past recessions, that eventually, what goes down comes back up. If the plan is for your investment property to fund your retirement and that’s still a long time away, time is on your side.
2. It’s not just about cashflow and price appreciation.
If, like many Toronto Landlords, the rent you collect doesn’t offset your costs, remember: that rent is paying off the principal of your mortgage, so you’re building equity too.
3. Real estate is an important part of a balanced investment portfolio.
It’s never wise to have all your eggs in one basket, and some of the world’s wealthiest people credit real estate as an important contributor to their riches.
4. You might not have a better place to invest your money.
That roller coaster ride? It’s not just happening in the real estate market – it’s happening with stocks and bonds too.
5. Your Tenant is paying rent, your life hasn’t been too impacted by the pandemic and it’s not causing you stress.
This might be the best reason to not sell your investment property at all.
If you’re not sure what to do, we’d be happy to help you talk through your options.