Situation: B.C. homeowners have an unprofitable rental, wonder if they can afford a bigger house
Solution: Sell the loser, use proceeds to get a larger home with rental apartment, cut costs and prosper
A couple we’ll call Lou, 47, and Martha, 46, live in B.C. Both work at the leading edge of technology, Lou in management for a sales operation, Martha in a consulting role in marketing. Their jobs are demanding. They have two children, one in elementary school, the other starting high school.
With combined gross after-tax income of $10,660 per month and net worth of about $1.7 million, they look forward to retirement in 18 years when Lou is 65. They are heavily dependent on the future of the property market. Four-fifths of their approximately $2.36 million of assets is their $1.4-million house and a $480,000 rental condo that loses money every month.
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Their problem is a time squeeze. Their younger child will not graduate from high school until Lou is 58. They want to buy a larger house, adding $250,000 to $500,000 to their present home’s $1.4-million price tag. “How much can we spend on a house before we jeopardize our plan to retire with $85,000 after tax income?” Lou asks.