Why You Shouldn’t Panic Sell Your Rental Income Property To Avoid Capital Gains
Short-term knee jerk reactions are never great for investments, but it happens all of the time. If the stock market goes down, we want to sell stocks that we should definitely be holding onto. It’s just human nature.
Ever since the 2024 federal budget has dropped, owners of second properties have been considering whether to sell or not sell their properties to avoid the increase in the capital gains tax. The reasons that you shouldn’t be doing this are similar to why you shouldn’t panic-sell a stock: everyone is doing it, and holding long-term is a better play.
You’re too much of a “motivated seller”
If you are pushing to close the deal before the middle of June, your buyers are going to know why and will absolutely ask for a price decrease. Remember, your tax “savings” are 16.7%. That means if you drop the price by 5%, you’re still technically making money, but what about the long-term equity loss? It may not be worth it unless you need the money this year.
If your property is tenanted, selling it as such before the deadline may be problematic
In order to get the most money you can for a property, it should ideally be empty. If your property is tenanted, there’s no way you can reasonably evict a tenant and stage the home for sale by the deadline of June 25. If you add up money lost on this and the “motivated seller” issue pointed out above, you may just cancel out a significant portion of your hoped-for 16.7% tax savings.
Be like Buffett and buy instead of selling when others are fearful
Warren Buffett wisely said: “Be fearful when others are greedy. Be greedy when others are fearful.” Property investors right now are fearful of a short-term issue: the capital gains tax. In a market like this, you should be going after those motivated sellers yourself and be the predator instead of the prey.
The long-term view is rosy for Toronto property values
According to Zoocasa, the average Toronto home price will be two million dollars in 2034. Holding on to your existing property or purchasing a new one will return far more value than selling or choosing to buy at a later date when prices have increased.
Even now, with the market in a bit of a downswing, the only sales that are depressed are condos. The demand for detached and semi-detached homes is still quite high, and prices in those areas are still increasing.
When should you sell your property?
You should really only participate in the panic selloff trend if you were planning to sell your property in 2024 anyway AND it is currently untenanted. If that’s the case, we can help. In addition to property management, we’re Realtors that have a built-in pool of investment buyers that we can connect you with.
Alongside property management, investment realty is our specialty and we’ve been doing it long enough that our repeat clients listen when we have something for them. If you were looking for an edge in the Great Capital Gains Selloff of 2024, we’re it. However, you should be prepared to take a bit of a lower price than you may expect as a “motivated seller” who is on a deadline. As your Realtor, we will obviously sell it for as much as we can, but the landscape will be very tight until the capital gains deadline has passed.
Contact us today to either be like Buffett and buy or have a better chance at selling your investment property.
