Should I Sell Investments to Buy a Condo?

Recently I made an offer to buy a condo.  Now it’s time to figure out how to best finance the down payment. Most likely, I’ll have to sell investments.

We all have been there; priorities change and we wonder, should I sell?  

Personally, I don’t really see real estate purchases as investments per se because they don’t always go up.  Though they can be tools to help create wealth.  Some personal finance gurus claim that owning real estate is for dummies.  Others say owning 50 properties is the way to become financially independent.

Either way, we all need a place to live so sometimes you just have to bite the bullet and do what’s best for you.

Earlier in the year, a friend asked me the same thing.  She was looking to up-size to a larger condo because she wants her daughter to have her own room.  To pay for the down payment, she was thinking of selling an investment fund she owns to supplement the equity in the condo she owned.  She wondered if she will regret getting rid of this investment? 

My scenario is similar in that my boyfriend and I are planning on moving in together.  Merging two lives requires a lot of purging and a slightly larger place would help the transition.  To come up with the down payment, we’d have to sell some investments in our TFSA.

First is the circumstances. In both cases, these investments are not part of a company-sponsored retirement plan. If it were, and the company also matches our contributions, we’d be leaving “free money” and that might alter the decision making trade-offs.

Now for the actual investment, without knowing what exactly is in it my friend’s fund, I assumed a good percentage is in equities. She is relatively young and most advisor-sold funds take age into account for that investor’s risk level. The younger the investor, the more equities they can have.  For our TFSA, it is all in equities.

In both cases, I don’t see a huge downside in selling.
Over the last 3 years, equities, especially US equities have done very well. We are now in year 8 of a bull market.  Usually, these cycles last 4-5 years.  Being in year 8 may mean we are near the top. There are debates as to whether we have already peaked or not. If we haven’t already reached it, we can all agree that it’s getting pretty close.

Considering the plan with the money is for a down payment, now is not the time to “time to market” and get into a game of chicken for selling at the absolute top. Over the past 3 years, my friend’s investment has returned about 10% a year.  That sounds great and I see why we’d all want to hang on to that – what if this year is another 10%!  If we sell now, we’re afraid of missing out!  But beware of FOMO investing! (I’m looking at you, Bitcoin.)

For my friend, I suggested that she could consider selling that specific investment because it requires a minimum contribution.  She can take out whatever additional amount she needs for the purchase of the larger condo.  She can then open up a self-directed brokerage account and purchase ETFs with what remains. This option has a bit of both worlds, she can still have some investments and have the cash set aside for a down-payment.

For my situation, we plan to sell the investments to pay for the down payment and then start re-contributing to the TFSA as soon as next year with the money we’d save from consolidating two household expenses into one single one.

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