“Sometimes you have to know when to leave the table”

About 2 years ago I closed on a midtown condo purchase.  The intent was always to hold this investment for a period of time, perhaps refinance and reinvest, but generally to hold … for Benji and Ella perhaps?!

Unlike some, I prefer variable rates for their flexibility, but naturally they come with their own risks … lack of predictability and such.

At the onset, it wasn’t so bad, I was in the negative but not by a ton.  But, as the rates continued to increase into 2023 (BoC rate sitting at 5% at present), the cost vs carry started to skew drastically and the investment no longer made much sense – it was time to get out!  

While my suite is one of the best in the area, with a terrific exposure and loads of upgrades, after nearly 2 months on the market, we got a less-than-ideal offer, worked with it and in the end sold while incurring a ~50K loss when all was said and done. 

Sucks, right?  But does it?

Here’s how I made my decision, by considering the following:

• Total cost in vs total cost out (ROI)
• Monthly expense to continue carrying
• Market upside potential
• Market downside potential
• General state of the market and economy
• And last but not least, the potential uses for the liquid funds from the sale (i.e. what else could I do with a sizeable sum of cash?)

With all of the above in mind, I decided to sell, here’s why:

• I believe the Toronto condo market still has room to correct (by 5%-7% if not a bit more into 2024/2025)
• There are plenty of freehold opportunities at the moment
• I’ve always loved freehold more – predominately for their future potential (rebuild, renovate, lane housing etc.)
• In down markets, cash is king
• I want to be liquid and jump on another opportunity that has greater upside potential and provides more opportunities in the way of renovating to differentiate vs competitors (condos do not allow for this)

The bottom line for me was as follows – the upside potential was simply not worth the risk of potentially losing more equity (on paper) while at the same time disallowing me to “make moves”, which may very well not just offset losses but also stand to gain far more ROI vs the monies currently tied in the condo.

Lastly, losses aren’t all bad, you can write them off, carry them forward etc. 

Just have a chat with your accountant!

“I lost 50K”, and while I don’t enjoy losing money, it’s not a race, it’s a journey.  The reality is that as an investor you’re not always going to make money, you have to be ok with this.  You’ll do well with some and perhaps not great with others, but in the end it’s all about learning, growing and continually making the best decision in the moment – based on your current circumstances!

Or, as my Brother Aria recently put it, “Sometimes, you have to know when to leave the table.” (a poker/blackjack reference)