We recently had a luxury rental on the market at $5000 per month and the phone rang off the hook. In fact, it got snapped up when two prospective tenants battled it out to secure the luxury duplex in the South Annex. We made a point of inquiring about the motivation of the callers, and we consistently found if it wasn't someone relocating to the city, they were existing homeowners who were preparing to sell their place(s) and were looking for a rental as their next step strategy.
The approach of selling your property first makes a lot of sense. Here are five reasons why:
1) You know how much capital you've got to spend on your next purchase. By selling in today's whack-a-doodle market first, you effectively determine how much capital you've got to allocate on a specific closing date towards your next purchase. Rather than operating with guestimates in advance of buying, selling first allows you to know exactly what your purchasing budget is. And who doesn't prefer to operate with knowns rather than unknowns?
2) You eliminate the stress of being under the gun to find a buyer for your existing home. How much your property is worth is often a function of your motivation. If you have to find a buyer to facilitate your purchase, there's a possibility you'll accept a lower sum than if you have the luxury of time. You also remove the need to arrange bridge financing at the bank which is difficult to obtain without a buyer commitment for your existing home. Today, the banks will provide bridge financing about two percentage points above prime if the closing date for the sale of your home comes after your purchase date, but you have to have a committed buyer. This increases your motivation and could compel you to accept a lower bid in your place. Do you want to have to accept a lower price because you're desperate? In a climate where the condominium market is oscillating differently than the freehold housing market, the condominium owner in particular is vulnerable to this sort of situation.
3) You can be more competitive when making a purchase. Having the liquidity that comes from selling your property allows you to compete more aggressively on a purchase, including closing quickly on a vacant property that you might otherwise be unable to complete if all your funds are tied up with unknowns. Selling first allows you to be more competitive, which is strategic in our current super-hot market.
4) Frequently more than one property must be sold to make the next purchase. In some instances it's a newly-merged couple who are taking the plunge of co-habititating in joint ownership. And sometimes it's a function that - given today's prices - buyers have to divest more than one of a property portfolio to acquire their next long-term family home. Regardless, sometimes liquidating in advance of buying eliminates the stress of making one purchase and suddenly having to sell two properties to facilitate closing. Why not sell at least one of these properties first to ensure you have available capital, close more quickly, and relieve the stress compounded by multiple sales? Sometimes we've encouraged couples to sell one condo, cohabitate in the other while they search for the house. So far, it's worked out swimmingly.
5) Chances are you're going to renovate anyway. In a city where the housing stock is typically one hundred years old, and most every property needs some sort of upgrading, selling first and moving into rental accommodation allows you to transition into your next purchase smoothly and without stress. If you're going to have to renovate your next purchase anyway, sell first, get the rental secured and begin hunting for your next property without any stress. Once you sell you existing home and move into your rental, you're set to secure that next great buy and coordinate your contractor to execute your dream renovation. With most renovations taking 4-12 months, getting into a rental is inevitable anyways. So take the stress out of what is already going to be an arduous process by securing your temporary digs.
At urbaneer.com, we know that taking the next steps to secure your dream home isn't always easy. This is why we're here to help and explore all the options with you to make it as effortless as possible, whether preparing your property for sale, finding you the right temporary rental accommodations, and guiding you on your search for that next perfect place. With over twenty years of experience, we LOVE what we do. I, and the Urbaneer team, make it our mission to guide you from your first to final purchase, plus any property in between. Along with educating, advising and gently steering you, our mandate is to identify the best locations and properties within your budget, identify dwellings you can easily upgrade and build equity over the long term, and counsel you on which final improvements can help you realize top dollar when it comes to sell. That’s our urbaneer way.
~ Steven and the urbaneer team
Like what you've read? Along with our forte selling unique urban spaces and other Toronto real estate, our FREE monthly newsletter explores housing, culture and design in Toronto. Consider signing up in the box below!