Hi everyone. What an excellent resource this forum is. Thank you all!
I have a question that I haven't seen discussed before and I am wondering if anyone is able to help me reason through this.
I have recently sold my place and the bank has advised that if I don't port my remaining mortgage (~400k CAD) to something else, I will need to pay a $20k penalty. It's a very specific timing thing based on where we are in the mortgage and how it compares to current posted interest rates, but needless to say it is non-negotiable.
I am planning to invest most of the profit I received from the sale and rent for 2-3 years and longer if needed. Therefore the only way to save this ~20k would be to port the mortgage to something that would be used as a rental property.
I live in a very HCOL area (Vancouver, BC) where it seems nearly impossible to even cash flow a property, let alone reach anything even remotely close to 1-2%. Even 1BR condos in the extended I am familiar with range from $450k-600k and only rent for $1800-2000 per month. Unless I want to pump 300k into the property up front, nothing will cash flow.
My question is this: If my horizon for holding a rental property would be 3-5 years, would it make sense to do the normal calculations for rental properties (income, closing costs, realtor fees, taxes, carrying costs, insurance, vacancy, appreciation, etc) and then just divide the total number of years by $20k?
For example, if I held for 5 years and broke even all else considered, would it be correct to say I was getting $4k/yr return just due to not paying the penalty? This seems simplistic so I am wondering if I am overlooking something.
Everything in my head is saying this is going to be a lot of work and potential a losing proposition, but on the other hand it is tough to stomach just handing $20k to the bank without at least looking at alternatives.
If it is helpful I am happy to post some details on specific rental properties, but my general question is whether I can treat this $20k "incentive" as part of the profit.
Thanks in advance!
