What’s Your Real Estate Exit Strategy?
Paul Simon may have crooned the 50 ways to leave your lover, but when it comes to real estate, how many of us make a new plan? Contrary to Simon’s lyric, there’s often much to discuss when it comes to setting ourselves free of a property.
While most of us buy thinking that one day we’ll sell, sometimes life gets in the way. We change jobs, or lose them. A death in the family changes our housing needs, and sometimes our financial situation. And yes, sometimes our wife, common-law partner or lover chooses to leave. To reduce the pain, it helps to have not just a new plan but a solid one.
Weathering financial change
Most of us take good fortune in stride. If we receive a windfall, we can pay down debt, including our mortgage, and save on interest costs. If the windfall is really big, we might consider buying a home with a little more room, or in a more desirable neighbourhood.
When we find ourselves short of cash, we can panic. Most financial experts recommend having three to six months worth of savings to weather storms and to plan our next step. Sometimes we can negotiate an arrangement with the bank, or sometimes we simply have to sell and move on. Having a few months’ savings can help us bridge the time between a decision to sell, and the sale that helps us recoup our equity.
Weathering relationship change
The same is true when relationships turn against us. When one partner dies, and both were on title, the transition is simple. But when a relationship breaks up, having clear terms for the disposition of the property can make for a more amicable separation.
Similar to a pre-nuptial agreement, an agreement that defines how much two people have brought to the property and what their respective share of the equity if they choose to sell can be helpful (a lawyer can advise on the specifics). Just as brothers and sisters should have agreements when they buy property together, it can’t hurt a husband and wife, especially if they’re not equal financial partners.
Weathering change, period
Finally, even if nothing bad happens, it helps to know how long you intend to hold a property. Will you live there five or 10 years? Will you need to downsize or retire at some point? Will you sell the property or become a landlord, and enjoy some rental income?
These are all good questions to ask when you’re buying a primary residence. A home is one of the single biggest investments you’ll ever make, especially in Vancouver. It pays to plan for the day you cash out.