Should you ever sell a real estate property? If you live in Toronto, you might have trouble letting go. And why should you, when the Toronto market experiences consistent growth nearly every year?

The answer is the same for any real estate investor. You need to know when your investment isn’t serving you anymore, either for financial or personal reasons. 

This might mean letting go of an existing asset to acquire something better. Or for the average family, it could be as simple as selling for affordability due to heightened interest rates. 

We’ll walk through some common situations that might signal it’s time to consider a sale.

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1. You can't maintain your mortgage payments, or fear you won't be able to renew

Historically, mortgage delinquency rates are not common in Canada. In fact, you could say it’s pretty rare. In the last ten years, Canadian mortgage delinquency has never passed 0.4%. And even that’s high — 2022 and 2021 saw average rates of 0.16% and 0.215%, respectively. 

The recent (2022 and early 2023) market is a bit different though. Scotiabank’s CEO has predicted over 20,000 mortgage holders are at risk of defaulting in light of the most recent interest rate hikes. 

Still, a default might not be the only circumstance that has you thinking of selling your property. Things are getting expensive. Then there’s mortgage renewal. Your lender didn’t require you to qualify for the stress test within your five-year term, but if it’s up in two years? You’ll face a bigger barrier to renewal on top of higher interest rates. 

Of course, it’s best to hold onto the investment if you just need a bit of time to improve your financial scenario. If you’re feeling like you may be in a tough spot, consider talking to your bank about a “mortgage vacation” (deferral) which lenders usually allow once every 12 months to mitigate financially burdensome times. 

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2. The market is high, and you could make a substantial profit

Remember when Toronto property listings were getting 10+ bids and offers upwards of $400,000 over asking? Yeah. That’s a good time to sell. A situation like that might make it worth letting go of an asset — especially if you see an opportunity for more investments elsewhere. 

Keep in mind this strategy isn’t ideal if you’re selling the home you live in. If you’re selling your primary residence (aka your home) you’ll have to find somewhere else to live. And assuming you’re buying your next home, you’ll be dealing with those same high prices you just benefitted from. 

But if you have some income properties under your belt? You’ll have an easier time softening the buyer’s blow in a hot market. 

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3. You're having trouble with your tenants

Ontario has notably long wait times and lots of red tape when it comes to dealing with rental arrears (non-payment of rent). Many stories have been surfacing about tenants refusing to pay rent for months or even a year before getting a hearing with the LTB — the only body qualified to enforce an eviction. 

But if you’re hitting months without rental income, and you’re unable to service the mortgage, maintenance, and taxes of the property as a result, then it may be a good idea to sell. It is worth mentioning though, that a tenanted property can be a hard sell to buyers looking for a vacant possession. Still, you might implement a more careful tenant vetting strategy next time with rent guarantee insurance, or shifting your investment strategy to flipping houses.

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4. Neighbourhood changes might not fit your needs anymore

Let’s say you bought a gorgeous condo with lake views and sun-soaked rooms. Then boom — another condo project is scheduled for construction next year. While this might not make your property value go down, you might lose the initial attraction you had to the condo in the first place. Plus, the 7 am construction is starting to grind your gears. 

Neighbourhood changes might feel a tad personal to the investor. Still, you have to remember your real estate property is an investment. An uptick in crime might feel unsavoury, but don’t let emotion force you to sell. But if that uptick started bringing down property values and leaving other similar properties on the market for too long? Then maybe you could consider your options. 

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5. You want to be more liquid

Real estate investing demands a lot of upfront capital. One or more mortgages might not bother the ambitious investor, but you might hit a point where you crave more liquidity. Instead of limiting your extra income to maintenance, insurance, and loan payments, you might prefer to enjoy your life more and travel. 

Plus, being more liquid doesn’t mean you have to give up real estate altogether. If your Toronto property is worth $1,000,000 and you’ve built $300,000 in equity, you could use your profits to invest in a cheaper home outside the city or province. That way, you might have a similarly sized property and more money left over to keep you liquid. 

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