I rented out my previous home in Woodbridge, Ontario (GTA-Toronto) but due to recent price corrections and inventory glut in last 2 years, I have negative cash flow. I am trying to decide if I should continue to Hold or rather Sell and re-invest when the time is right. Holding the property is tricky since home ownership is 90% + and there is downward pressure on rents. On the other hand, its still a growing market and not too far from the Vaughan downtown redevelopment on hwy 7 which includes a new subway terminal, multiple high rise projects. Prices went down by about 18% in 2017 but have levelled off.
All views and pointers from local experts welcome. Please provide your reasoning as well.
Some people are comfortable paying into a rental property because they see it as a forced savings plan. They're counting on appreciation and mortgage paydown.
However, I don't think you have to be in a negative cash flow situation. You're real estate investment shouldn't just be a savings plan, it should be making you more money. And there are plenty of markets outside of the GTA that will cash flow positively.
The question is, how much equity do you have in your house? Could you sell now (or in September when prices are a little better) and make enough to reinvest in a cheaper market (like Hamilton, St. Catherines, Kitchener, Guelph...)?
If you can make 50k - 100k on the sale, i would go for it. Invest that cash in one or two properties that will actually generate income for you month over month.
How much are you paying into the home every month and how much do you have invested in the home? Ie what did you pay for it, how much do you owe and what is it worth now?
As Joel said, if you can sell it and walk away with a good chunk of money AND invest it in another home, or two, then go for it.
Real estate prices change with time. My first place I bought in Vancouver was for me to live in. When I moved, I turned it into a rental. House prices dropped (this was in the mid 1990s), but I held onto it. House prices went up and when I sold it, the price had almost tripled. Yes the prices went up again after I sold it, but I was happy I sold it when I did (condo board did some weird financing just after I sold it). I used that money to buy two other places (not in Vancouver).
If we know all the details of the #'s we can better guide you.
Is there a secondary suite or potential for one?