How To Be Mortgage-Free: The Buy, Hold and Sell Strategy
Everyone wants to be mortgage-free, but not everyone has the time to flip a house and yield the results of return on investment from back breaking work. Instead, what if I told you there was a way you could be mortgage free without having to move out of your own home? Income properties are an excellent way to do that.
Some people might have concerns that monthly rent payments from a tenant might not cover mortgage payments, and so they cannot visualize investing in a property where they only see losses.
I am here to tell you that this is not the case, and that when it comes to income properties, you need to focus on the long game.
Let me break down some important costs to demonstrate to you, how having a condo income property in Toronto is a very financially sound investment.
Ensure that you have 30-35% of the value of the property you are looking to buy as a down payment. If you have less it is likely you will not cover the carrying costs.
Let us assume that you want to purchase a condo today that is valued at $375 000. You currently have $75 000 (20% of the total property value) as a down payment. Your condo fees are $350 a month, and your taxes are $2400 a year. Your total mortgage would be $300 000, your total monthly costs would be $1418, and your total monthly carrying costs would be $1968. You have found a tenant who will rent the property for $1600 a month. Which would therefore show you a negative net cash flow of $368 dollars. This is where most people get scared, as I have already mentioned. But I am here to reassure you that this is actually a good investment.
This is because you need to look at the long game. Five years from now, your mortgage balance will be $245 000. You will have built a total equity of $54 900, and you your average equity build per month will be $915.72. If we take our total monthly return and multiply it by 60 months (5 years) and divide it by our total investment (our initial down payment plus our monthly mortgage payments) we will have 28.2% total return over 5 years which would be compounded at 5.1% annually.
That 5.1% is the number that matters most when it comes to the long game! The more this number grows the bigger your return on investment will be!
I haven’t even touched the concept of home appreciation, which is another huge source of profit when it comes to income properties. If we purchase a condo for $500 000 and it appreciates by only 1% after 5 years that total value will be $525 000. With a total net return over 5 years, we will have a 53% profit!
That price already sounds good, doesn’t it? But what if I were to tell you that for the past five years, condo prices have increased annually by 15-30%? And that 46% of Torontonians rent! And that rental vacancies are less than 1%!
Rent prices are currently at an all-time high. This is one of the best times for people who are seeking an opportunity to pay down their mortgage without having to move. We are currently enjoying a crazy Toronto condo market and I would love to teach you more on how to be mortgage free using this buy, hold, and sell strategy.
If you would like to learn more, please feel free to either watch my above YouTube video or contact me here.