Should I sell my house and buy a townhouse??

Leveraging, renting vs owning, making an investment or buying a home?
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wdiddy
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Should I sell my house and buy a townhouse??

Post by wdiddy » 04 Aug 2017 18:54

My home is worth about $1.1 million and I owe about $200,000 still, I have a rental suite that pays $900 per month.
I was just looking to see what downsizing would look get me and saw some nice townhouses in the $650,000 range
My wife and I don't have any kids and no other debt.
Our current home is about 3800 sq ft but we only have the upper 2 floors which is about 2500 sq ft
The townhouse is close to 3000 sq ft
My wife and I net about $70,000 per year

I have been investing in the stock market for the last couple of years and have pretty decent results but my portfolio is only about $35,000.
I was thinking if I did down size, which in reality is really an up size since we would actually have more space, I could invest some of the left over funds from the house sale which should be at least $200k and probably earn at least another $20k per year from my investments. By using up all of our TFSA room I could up my portfolio to $100,000 and all the gains would be tax free.

What do you guys think, I don't know if I'm missing something as it looks like the obvious choice is to down size. My wife and I could both retire early if things go as planned. Living where we live now I don't see retirement for about another 7-10 years, I am 46 now and my wife is 40.

hamor
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Re: Should I sell my house and buy a townhouse??

Post by hamor » 05 Aug 2017 09:12

I don't know where you're, RE is all about location :)

I think you left out one thing - emotional value. E.g. I don't want to sell my home, cause I like it, I moved a lot in the past and I am really not looking forward to more moving. Some people put money first, nothing wrong with it. A colleague said he'd move to Nova Scotia from ON if his house hits $2M (he's not from there).
No one knows what will happen to RE or stock market. I usually look at opportunities like this trying to assess the risks and possible outcome:
- what if RE goes down, r u better off or not? will your current house go down more than the townhouse? what about the rent?
- what if stocks go down? after you invest?

tedster
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Re: Should I sell my house and buy a townhouse??

Post by tedster » 09 Aug 2017 11:52

If the houses are about the same size and the area/location is about the same, I would sell the other one. A bird in hand is dinner on the plate.

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Descartes
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Re: Should I sell my house and buy a townhouse??

Post by Descartes » 09 Aug 2017 12:51

Exhausting your TFSA contribution room is almost always a good move but..
I would suggest going over this more precisely before deciding anything.
As an example..

What commission do you expect to pay in selling your home?
If it is more than 4.5% then you are not going to net 200K even if you can buy the new townhouse all-in for 650K.

What kind of investment are you considering?
20K from 200K is a 10% annual return. This sounds either quite risky, optimistic, or both.
"A dividend is a dictate of management. A capital gain is a whim of the market."

tedster
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Re: Should I sell my house and buy a townhouse??

Post by tedster » 09 Aug 2017 15:15

I am no financial expert. However, it seems to me that if you can realize a significant non taxable profit on your current home and then invest it safely you would be further ahead than keeping it. You do not lose in space in the new place and it will cost less. This is especially true if the area in which you will be living is as good as the one in which you now are.

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Descartes
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Re: Should I sell my house and buy a townhouse??

Post by Descartes » 09 Aug 2017 16:01

tedster wrote:
09 Aug 2017 15:15
if you can realize a significant non taxable profit on your current home and then invest it safely you would be further ahead than keeping it.
I would suggest that this is no different than any other investment you might own:
You need to weigh "should I sell now and realize my capital gain and transfer it into a different investment or should I let it ride in the hopes of further gain + future dividends (in this case, rent)".

The answer may be easy for the OP in this case. The discipline to always ask oneself such questions before acting may not be. Further to my other point: you need to do the math to get a proper answer.
"A dividend is a dictate of management. A capital gain is a whim of the market."

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kcowan
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Re: Should I sell my house and buy a townhouse??

Post by kcowan » 09 Aug 2017 18:58

Descartes wrote:
09 Aug 2017 16:01
The answer may be easy for the OP in this case. The discipline to always ask oneself such questions before acting may not be. Further to my other point: you need to do the math to get a proper answer.
And the math including all frictional costs of moving which are significant and have some surprises.
For the fun of it...Keith

wdiddy
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Re: Should I sell my house and buy a townhouse??

Post by wdiddy » 15 Aug 2017 00:09

hamor wrote:
05 Aug 2017 09:12
I don't know where you're, RE is all about location :)

I think you left out one thing - emotional value. E.g. I don't want to sell my home, cause I like it, I moved a lot in the past and I am really not looking forward to more moving. Some people put money first, nothing wrong with it. A colleague said he'd move to Nova Scotia from ON if his house hits $2M (he's not from there).
No one knows what will happen to RE or stock market. I usually look at opportunities like this trying to assess the risks and possible outcome:
- what if RE goes down, r u better off or not? will your current house go down more than the townhouse? what about the rent?
- what if stocks go down? after you invest?

Sorry I am in Surrey BC and no real emotional connection.

wdiddy
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Re: Should I sell my house and buy a townhouse??

Post by wdiddy » 15 Aug 2017 00:13

Descartes wrote:
09 Aug 2017 12:51
Exhausting your TFSA contribution room is almost always a good move but..
I would suggest going over this more precisely before deciding anything.
As an example..

What commission do you expect to pay in selling your home?
If it is more than 4.5% then you are not going to net 200K even if you can buy the new townhouse all-in for 650K.

What kind of investment are you considering?
20K from 200K is a 10% annual return. This sounds either quite risky, optimistic, or both.
My friend is a realtor and said he would waive most of his share so I would have to pay about $20k. I am expecting to invest about $100k and to earn about 10% which I have been exceeding easily the last 2 years. If you watch everyday you can make 10% in a day.
I also have recurring revenue that equals about $20k/year.

wdiddy
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Re: Should I sell my house and buy a townhouse??

Post by wdiddy » 15 Aug 2017 00:15

kcowan wrote:
09 Aug 2017 18:58
Descartes wrote:
09 Aug 2017 16:01
The answer may be easy for the OP in this case. The discipline to always ask oneself such questions before acting may not be. Further to my other point: you need to do the math to get a proper answer.
And the math including all frictional costs of moving which are significant and have some surprises.
I would move only 5 minutes away and have friends and family to help.

peter
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Re: Should I sell my house and buy a townhouse??

Post by peter » 15 Aug 2017 01:07

wdiddy wrote:
15 Aug 2017 00:13
Descartes wrote:
09 Aug 2017 12:51
Exhausting your TFSA contribution room is almost always a good move but..
I would suggest going over this more precisely before deciding anything.
As an example..

What commission do you expect to pay in selling your home?
If it is more than 4.5% then you are not going to net 200K even if you can buy the new townhouse all-in for 650K.

What kind of investment are you considering?
20K from 200K is a 10% annual return. This sounds either quite risky, optimistic, or both.
My friend is a realtor and said he would waive most of his share so I would have to pay about $20k. I am expecting to invest about $100k and to earn about 10% which I have been exceeding easily the last 2 years. If you watch everyday you can make 10% in a day.
I also have recurring revenue that equals about $20k/year.
10% a day is nice, that would turn $1 into about $190 million in 200 trading days. In that case I wouldn't bother selling the house. People's estimates of long-term returns for the stock market vary but I agree with Descartes that 10% is either quite risky, optimistic, or both. Per year, not per day. More common/reasonable ball park estimates are 2-4% of portfolio value per year.

newin96
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Re: Should I sell my house and buy a townhouse??

Post by newin96 » 15 Aug 2017 12:59

Can I send you $1 to invest? Only give me back $1 million next May, and you keep the rest? :thumbsup:

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Descartes
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Re: Should I sell my house and buy a townhouse??

Post by Descartes » 15 Aug 2017 13:25

I can only guess that the OP really means one could easily make 10% a year
since one could make 10% in a single day provided you are "watching every day".

So.. all you need is to be net one good "watchful" day each year and you can make your 10% per annum.

This is a confidence that maybe only gets tempered by a couple of painful beat-downs.
Only a 35K portfolio and a couple of years investing experience suggests it is still very much early days..
"A dividend is a dictate of management. A capital gain is a whim of the market."

tedster
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Re: Should I sell my house and buy a townhouse??

Post by tedster » 15 Aug 2017 14:04

widdy
by newin96 » Tue Aug 15, 2017 11:59 am

Can I send you $1 to invest? Only give me back $1 million next May, and you keep the rest? :thumbsup:
Me too?

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Koogie
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Re: Should I sell my house and buy a townhouse??

Post by Koogie » 15 Aug 2017 16:31

What I can gather is that you have a net worth of about 935,000$ and 96% of it is in one asset ?

Ask yourself it that is balanced and a good idea in your forties.


(disclosure: I am generally anti real estate).
Buy very little, sell even less.

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