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Downsizers: Should You Own or Rent?

Tags: Condo, Downsizing

When beginning the process of downsizing and weighing whether to rent or buy it’s important to examine your downsizing goals and timeline to determine the best plan for you and your family. Capitalizing on the real estate market when downsizing can be a great way to ensure your retirement savings continue to grow after you sell your family home. Before deciding whether to rent or buy, discuss with your spouse, financial advisor and family and be clear about your goals and expectations for your next home and your retirement.



Do you view your new condo as a future investment or another monthly cost of living? If you are no longer carrying a mortgage on your family home, chances are you are able to buy your condo and have a significant amount left over. This means your new condo becomes a significant investment opportunity. With steadily increasing condo prices in the GTA, and no mortgage or interest to pay monthly, you can cash out on your current home and collect a significant Return on Investment (ROI), extending the life of your retirement savings.



How long do you plan to live in your new condo? Although it’s important to run the numbers with a financial advisor, a good rule of thumb is you should expect to hang onto your new place for at least two years to recoup the money from lawyer fees, land transfer taxes and other closing costs. In our current condo market, this time frame may decrease. Also consider your plans for your condo if you do choose to move. Will you need to sell? Will your children or grandchildren benefit from this extra property? Could you rent out your unit and turn it into monthly income to fund your retirement plans?



Often downsizers see more value in parking the money they make on their family home in the bank and collecting interest while renting. This is a viable option and will definitely yield profits. However, it’s important to weigh your options when deciding how to invest your money. In Q1 of 2016 the average condominium in the GTA sold for 8.1% more than Q1 of 2015. Combining your cost of living with investment goals and capitalizing on the lucrative GTA condo market is a smart move when downsizing.



In addition to pocketing the ROI on your condo, owning your condo can mean a way to establish additional income during retirement. If you plan on traveling more leading up to or after retirement, renting your suite is a great way to make extra cash during these weeks or months abroad. Subletting your condo allows you collect income versus paying rent to house your personal items while you travel. This monthly income may even be enough to fund your trips.