How Condos Can Help You In Retirement

Posted by Alex Wilson on Thursday, December 12th, 2019 at 9:00am.


The Globe and Mail recently released an article titled “Income Preservation Should Be The Priority For Retirees.” Though the article had nothing to do with real estate, both subjects do go hand-in-hand. 


Income preservation should be on top of your mind for your retirement and you can use condos to do that.


“Rather than ensuring they don’t run out of money, investors and their advisors should worry more about creating a steady income throughout retirement that keeps pace with inflation.” 

- Darren Coleman, Senior Vice-President, Private Client Group and Portfolio Manager at Coleman Wealth.


Investing in condos is the perfect way to do so. Developments built after November 2018 do not have rent control, giving you the ability to increase rent to market rates allowing you to keep up with inflation and to create a steady flow of income.


“Providing income without significantly eroding capital is a conundrum for many advisors.”


Investing in a condo in Toronto eradicates said conundrum. When you own a property you have tenants, tenants pay rent on a monthly basis, every month your capital increases as your mortgage gets paid off. In 30 years the mortgage will be paid off, you won’t need to tap into the equity of the property, and you’ll continue to receive monthly payments. 


Mr. Coleman says he “typically uses a portfolio of blue-chip dividend stocks, real estate investment trusts, and mortgage investment corporations for his clients.” Thing is, you can’t control the companies behind the dividend stocks, the real estate investment trusts, or the mortgage investment corporations, as ypu don’t own those assets. By investing in physical assets, such as condos, you have full control of the outcome and can go a significant way to preserving your income in retirement. 


“For the average person, their cost of living probably goes up between 3% to 5% per year. Noting food, rent, and transportation typically outpace the Bank of Canada’s target 2% inflation.”


What better way to hedge against your cost than having one of the things that is higher than your average rate of inflation as an income source coming from an asset your own? You can offset the other items in your life where your cost of living is going up. 


“Fixed income investments that yield about 2% obviously can’t meet this need [...] You basically need a pretty big stack of cash to invest and live off the income.”


Though I agree that the stack of cash is essential, you’re not looking at a 2% fixed income investment. By investing in condos now, before you reach retirement, you’re looking at a return that will be much greater and consistent. 


Some clients reaching retirement have wanted to purchase a multiplex. The reason I continue to recommend condos is that, if for any reason you need to sell your asset, you can sell 1 condo and have more in your portfolio. Whereas if you own a multiplex you’d be selling your entire asset. Most multiplexes are also under rent control, which means you can’t raise your rent to keep up with inflammation. Unless, of course, they were built after 2018, though the likelihood of that is very slim. Building your portfolio with condos allows for a lot more flexibility. 


Income preservation should be top of mind, even if you’re not retiring today. This model works for 10, 20, 30 years out. Start thinking about your future now and invest in real estate today. Allow someone else to build up that big stack of cash for you so you can live off of it in your future years. 

We can help you get there. Email or call/text (416) 996-5181. We’ll work together to make your real estate dreams come true and help you build generational wealth and financial freedom.

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