11-06-2015, 06:25 PM
(11-06-2015, 06:12 PM)mpd618 Wrote: After you've paid out the mortgage, you own the property outright. Even if your rents didn't cover the full costs along the way, and even if there's zero capital appreciation, it seems to me that this can still be a financially reasonable thing to do. Or am I missing something?
I would personally say it's not. In Owen's example of a would-be investor purchasing a condo unit for $250,000 with a mortgage payment of $930 a month, that's a 25 year amortization at historically low interest rates (2.84% is what he figured) with a short term for which the rate is fixed. A lot of rate risk, in other words. If the unit owner is cash flow negative, it's true that he's eventually going to pay down the mortgage, but it's not paid down for 25 years (which is the same period over which the property can be depreciated to zero- and there's no land involved). Eventually, rents will hopefully rise at least in nominal terms, but it seems like a tonne of risk- risk that maintenance costs will go up (and with condos, many of those costs are outside of your control), risks that rents will stagnate. I can't see it making sense to take that on for a property on which you will continue to shell out cash month after month, just in the hope that the mortgage will over the (I would say quite) long term be paid off, and you can sell the property and incur capital gains tax (if you ever had occasion to claim CCA on it).