It looked to me they would spend another $250,000 easily in land transfer taxes, landscaping, refinishing, and the eventual realtor commission when they list the property for sale again.
Every year they carry the house will add another $165,000 to their cost base. Yes, they could offset some of this if they rent out the house in the interim.
There will be tax issues – they may be successful claiming the interest costs as tax deductible (not a slam dunk), but the eventual capital gain on the sale of the home will be a taxable event – thus encroaching on their coveted profit.
As lovely as the home is, it is very close to Bathurst and Highway 407 – there is a noise factor – especially when outdoors.
In the industry we talk of the buyers’ pyramid. At the bottom of the pyramid are entry level houses, with thousands of potential buyers. As prices increase, you approach the apex of the pyramid – and there are only a few buyers in the market at any given time who can entertain buying a multi-million dollar property.
Most importantly, what is the real value of this home? Buyers aren’t stupid. If $2.8 million is a steal, why had the house been on the market almost six months? And it had been reduced several weeks previously from $3.5 million.
Once this house is purchased, the buyers’ new neighbours will not roll out the welcome wagon. Why? This would be the most recent comparable sale price to which all other resale homes and lots in the area will be gauged. How do you think the people selling down the road will feel about their $4.3 million asking price? What do you think this will do to the price of the empty lots nearby going for almost $2 million?
This single transaction may well exert downward pressure on all surrounding values – resulting in a much longer holding period than James and Rachel anticipate.
Anyway, after a few sleepless nights, they decided to pass – and within a couple of days the home was sold for $2,726,000.
What do you think? Should they have rolled the dice? How should I have guided them?