If you're not making an extra $92,000 this year, then it is time to sell your home.

This is a real conversation that I had with a client this week, without disclosing any names. They live in a two bedroom condo in downtown, which is worth approximately $800,000 and they're not sure if they should sell the condo this year and buy into a semi-detached, which is what they're looking at or if they should wait for another year, save additional funds and then sell and buy at that timeframe.

Let's do some math and stay with me, I know it's quite a bit of numbers but here's a scenario that I ran for them, based on 10% appreciation this year. And the market looks strong. I'm not sure where it's going to end up but we can adjust those numbers, whether it's 8 or 10% but for this specific example, I'm using 10%. let's say their condo appreciates by 10%. The $800k becomes $880k in 12 months timeframe and the semi-detached they're looking at in that specific area, they're selling for $1.3 million. That $1.3 million becomes $1.43 million next year, 10% on both the condo and the semi-detached property.

Now, let me break that little bit further for you. The difference between the two is the $130k appreciation of the semi-detached home versus the $80k appreciation on the condo. They need to come up with that extra $50k between these two. And the other part is the land transfer taxes because the price went up from $1.3 million to $1.43 million, is an additional $5,200. They will need in 12 months timeframe, $55,200 more just to be in the same position they're at today, based on an assumption of 10% appreciation.

Now, you're thinking $55,200 might be doable. That's approximately $4,600 a month but that is after tax dollars. Pre-tax, if they are in that 40% tax bracket, they have to make $92,000 extra in order to be in the same position they're at today, next year, in order to maintain that gap, based on an assumption of 10% appreciation. I know there's a lot of numbers here but the point that I want to drive is, it's good to sit down if you're in that boat and you're not sure if you should buy, you should sell, wait a year. Sit down, let's run some numbers and analysis to see what makes sense because it's not that easy to make an additional $92,000 in one year to take those funds and have them pay for the difference if the market continues to appreciate moving forward for the next 12 months. If you're looking to buy, sell, get in, get out of Toronto's real estate markets, please feel free to reach out. I'd be more than happy to run numbers for you. And last but not least, make sure you like, comment and subscribe. And until next time, happy investing.