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I own a condo in downtown Toronto Is it a good investment to keep holding onto - Parkers Legacy

I own a condo in downtown Toronto Is it a good investment to keep holding onto

Divide the amount you could rent the condo out for after expenses on an annualized basis by the condo’s current market value.If that sum is above prevailing interest rates, it is a solid investment.If the sum is below prevailing interest rates, the condo is overpriced and you should sell it.

Example- Let’s say the condo’s current market value is 1 million and after expenses you can rent it out for 70–80,000 a year.Thus 75,000 / 1,000,000 = 7.5%.Here in the U.S mortgage rates are roughly 4%.

Thus, if you chose to rent it out, you’d be earning a 3.5% return above your cost of capital.Again, this assumes that the maintenance, fees, and utilities, are included in the rent and that the property taxes are paid out of your own pocket, or, from another source.On the other hand, IF, after all your costs, your net is only 30,000 a year, and prevailing interest rates are 5%, then the condo is NOT a good investment.

For you are not earning a return on capital above your cost of capital.30,000 / 1,000,000 = 3%.