# Sell and Rent?



## jman123 (Jan 28, 2015)

Hello,

I am a 61 (soon to be 62) year old male living in Montreal. My wife is 60 years old and we are still both working. 

This year I am seriously thinking about retiring after working 40 years (anniversary will be around November I think). 

Kids are out of the house. No mortgage or debt. I make about 76K/year , wife about $18-19K/year. I also took my QPP early which brings me about 9K/year (I invest all of that in my RRSP). I have about a $50K RRSP contribution limit which I am dwindling down. I put away a total of about $325/week automatically in a mutual fund in a spousal RRSP and also something with my employer (3% of my salary matched by employer). Together, a little more than $20K this year. 

House is worth about $400K, my savings are mainly in RRSP's managed by RBC Dominion Securities. $760K in RRSPs , $15K in cash, $15K in TFSA's and $10K in a non-registered fund. RRSP's are all in mutual funds (Fidelity, AGF, MacKenzie,etc..)

I'm thinking of selling the house (it cost now about $800 / month for taxes, utilities, maintenance, etc...) and possibly renting. I'm thinking something around $1500 per month to rent. Want to be fluid though as I am torn between renting and buying a condo. 

From when I bought the house to today I figure it has gone up approximately 2-3% in value per year so I'm trying to figure out if it pays to sell and rent?
When I asked my financial advisor his opinion was that I had to be super safe and of course any gain from investing the $400K would be whittled down by taxes.

Does it make sense financially to sell and rent?

Thanks.


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## Davis (Nov 11, 2014)

Keep the tax impact in mind. You'll to earn $2500 a month if you're paying 40% marginal tax rate to cover $1500 in rent. Keeping the money invested in your house earns you a tax-free return - lower housing costs. It may be worth it to you to avoid the hassle of home ownership. Just make sure you consider taxation in your financial analysis.


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## Just a Guy (Mar 27, 2012)

I think, what's more important to consider, is when you think the real estate bubble will burst. With the rate cut, it may be postponed for a bit...but then one looks at the price of oil (no job, can't afford a house), but oils doesn't drive Canada...so it would be more a regional issue short term...but it'll have ripple effects as well. So, where you live is an important factor.

If housing does burst (there are those who think prices will at worst go flat), your value may drop by 50% and you may be unable to sell as no one can afford to buy...of course, the housing could continue to increase while rates remain low...

So, do you want to gamble on housing staying the same or possibly increasing, or would you like to cash out and play it safe is one way to look at it. Of course, you're financially stable already, so it could be safe to not sell...since you don't need the equity.

How is your health? Would one of the senior living (graduated developments from living alone, to assisted living, to home care, to nursing home there are complexes that handle the entire gamut where you don't need to "move") be appropriate? Would your home, or rental need special modifications (access doors, ramps, railings, bars, etc) soon?

There are probably many other things to consider as well...


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## fraser (May 15, 2010)

We sold our house in Calgary two years ago. It was a large home. So glad we did. After owning our own home in various cities for 35 plus years it is a pleasure to rent. We now spend less on housing and more on travel. Smaller codo is so much easier to maintain. And the owner of our condo just had to pay a $35K assessment last year. 

We travel often, and for extended periods. Our return on the equity from our house proceeds,after tax, over the past two years has exceeded even the increases in the Calgary real estate market. Now that oil prices have tanked and real estate will follow we have yet another reason to be thankful about renting vs buying.


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## jman123 (Jan 28, 2015)

Thanks to all who replied. 

From the tax angle in selling the house I am thinking of putting the proceeds in my wife's name (because actually the house is under her name). I'm assuming that I will get dividend income from the $400K (less the amount to top up our RRSP's and TFSAs) and with her earning less than 20K per year I wonder what the tax hit will be.

I don't know if I can then later play with that >$300K amount shifting some of the monies to myself if and when I retire (and she doesn't) in order to possibly save more on taxes. Would any one know?

As for a housing bubble, I am not sure if we have too big a bubble here in Montreal. I can see that more in Calgary, Toronto or Vancouver. I bought this house for $275K almost 12 years now and I figure maybe I could get a little more than $400K for it now. Not explosive growth. However, it is possible that the market could go down. 

I know a lot of people consider keeping the house in case long-term care is needed but our health is pretty good so (hopefully, cross our fingers) far so maybe that would be 20 years from now.

From another financial aspect I see where I am living now is costing me $800/month. Paying $1500 for a rental really only costs me an additional $700/month. Maybe I'm not looking at this correctly? 

I was wondering... If you had, say $300K to invest outside of an RRSP/TFSA what would you invest in that is (relatively) safe and (relatively) liquid ?


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## naysmitj (Sep 16, 2014)

When you are looking at taking all the money from your relatively safe investment of a house and looking for something else to invest it in that is (relatively) safe and (relatively) liquid, you should consult an accountant. Information recieved here is not investment advise, it is a rambling conversation with people you do not know.


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## leoc2 (Dec 28, 2010)

Perhaps you should consider attribution rules from the proceed of the sale. I'm not sure you can transfer the principal amount back and forth from husband to wife or vice versa. You may need to setup a prescribed loan.

http://www.taxtips.ca/personaltax/attributionrules.htm

http://www.cra-arc.gc.ca/tx/ndvdls/...rprtng-ncm/lns101-170/127/rsdnc/menu-eng.html

http://www.thebluntbeancounter.com/2013/02/prescribed-rate-loans-using-family-trust.html


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## fraser (May 15, 2010)

You absolutely need to do the math..the after tax math. And understand/appreciate your own wants and desires. 

One good thing about renting is that your assets are liquid. I know of two people in Calgary who want to sell however the market has swiftly turned to a buyers market. I realize that Montreal is a very different market....lived in Pointe Claire for a good period of time and still have many family connections to Montreal. But so very, very glad we moved west.


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## OldPro (Feb 25, 2015)

I would never agree it is a good idea to rent rather than own your home in retirement. There are simply too many variables that come into play and that you cannot account for.

For example, most people looking at retirement look today for a 2.5-3.0% return on investments. At 3% your $400k would only return $12k per year. That won't even pay the rent. Nor is rent your only expense if you rent. You still have to pay electicity, house insurance, etc. So I would not even accept the argument that it can make sense financially. Yes, if you get a high enough return but just how likely you are to do is a big question.

But even ignoring that, there are so many intangibles that it affects as well. Suppose your wife wants a new kitchen or bathroom after a few years. Then what? You're gonna up sticks and move to a newer rental to get it? That has a cost as well as a hassle factor. How much $$$ do you put on the hassle factor? Suppose you decide in retirement that you want to grow vegetables in the back yard. Is the landlord OK with you digging up the lawn? Owning your home means YOU are in control, renting does not. 

What I DO think makes a lot of sense in retirement is re-evaluating WHERE you live. One major reason for that is property taxes. When you work for a living you may need to live in a city. But do you still need to live in a city if you are retired? Moving to a small rural town can dramatically reduce property taxes. What's more it often reduces the cost of a comparable house dramatically as well. My Brother sold a condo in Toronto and moved to a small town in Ontario where his taxes were halved and the money from his condo would buy him THREE detached houses twice the size of his condo. 

His housing costs are less for a bigger home and he still managed to invest 2/3rds of the equity that was in his condo. Renting vs. owning is not the only option you have.


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## Rebecca (Aug 10, 2014)

Another possibility to consider is the fact that you may have to move more frequently than you'd like, if you rent. My mother didn't want to leave her house for that reason. If you are renting an apartment, you have a little more protection, but if you rent someone's condo, they could decide to sell it, or move into it themselves, and then you'd have to hit the pavement again looking for another unit to rent and then go through the physical move as well. My mother knew that those things would become much harder as she aged (and obviously we only started talking about it when she was already a senior), and wanted more stability. A retirement home that moves you from stage to stage (as mentioned above), is what she finally decided to do in the end.


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