Do I sell or keep?

Question

Hi everyone,

I purchased a Jr 1 Bed condo in Leslieville, Toronto right by Dundas and Carlaw back in Jan 2020, thinking it would be my primary residence until I start a family. Then, I started renting it out because I didn’t like living in that unit and also wanted to move to California, so I’m realizing I’m not sure it makes sense from an investment POV since I made the rookie mistake of not seeing it as an investment property first.

I like the idea of holding at least one property that I can use as an investment vehicle, until such a time as I’d like to move into it myself. Is this something I should consider doing? Here are some numbers to help shed light…

Purchase price: $536,000, Sq ft: 513, average price per sq ft is 1081, and the building is 10 years old

Costs:
Interest payments: $10,164.51 a year
Taxes on net rental income: $1331.21
Property taxes: $2,211.60 a year
Property insurance: $497.52 a year
Maintenance fees: $3653.52 a year

**Total expenses**: $17,858.36
**Total gross rental income**: $1821/month or $21,852.00/year
**Difference: +$3993.64**

I guess in my head all the real estate investing I've read said I should be netting a positive cash flow, and I'm not which is why I'm not sure if I should keep it given I am technically netting out positive despite me having to take cahs out of pocket to continue funding the principle payments

I’m debating if I should sell, keep, or port my mortgage over to into another property that makes more sense from an investment perspective and also one I wouldn’t mind living in later when I am ready to settle down?

Thanks everyone for your advice!

Ben Shelbourne · Answer

Considering you bought it in Jan 2020, I'm sure you will have gained a considerable amount of equity since then which you can take and reinvest in a better property.

Nathan Gesner · Answer

I'm surprised it costs over $500k and only rents for $1,800.

It's not making enough money to justify keeping. Sell it and invest in something better now that you now better.

Jonathan R McLaughlin · Answer

Oh I see, you just calculated interest not principal on your return, I missed the part where you were paying cash to keep it. Also the part where you don't want to move back :)

Not real exciting as a hold.

Hai Loc · Answer

Your balance sheet may be $3999 positive but out of pocket paying the principal doesn't make sense

Joe Villeneuve · Answer

sell it before you're done reading this comment.  Why are you asking? You should have sold it a long time ago

Christopher H. · Answer

There is going to be many good properties on for a very fair price over the foreseeable future, imo.  If this property isn't giving you a decent return then it might be time to consider alternatives.

Christine Ko · Answer

Yeah, I was thinking of doing a HELOC but the issue is, mortgage interest rates in Canada vary widely once terms are up, so every 5 years i don't know what I'm signing up for. My interest rate until 2025 is 2.69% but once it goes higher, I'm worried a HELOC will place too much burden on me financially. They're building a subway stop directly under the building in ~10 years so I know the appreciation would not be insignificant, so maybe I can treat it like any other investment in the sense that I'm paying out of pocket every month for an expected appreciation in the future? I just don't know what else I would do with the money aside from buying a primary property residence...but I don't want to kick myself for selling it now, and then 2 years later it's up $100k

Jonathan R McLaughlin · Answer

you aren't taking account loan paydown into your returns, which in a 536K property is a fair amount and grows over time. Not sure about Canadian loan structures so this might make it decent to hold if you want the option of moving back. Good location in Toronto? Wouldn't be so quick to unload if you are covering expenses.

But...

what else can you do with the money?

And you will have vacancy and repairs which I don't see in there, 10 year old building or not.

Do I sell or keep?

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