Appreciation is a bonus

“What will that house be worth in 5 years?” I’ll just pull a number out of my a… thin air for you and it will be wrong. The number will be either way too low or too high.

If you’re buying a house to live in, yes, we want to choose a location that allows your house to appreciate while at the same time providing you shelter. That’s the whole point of buying your primary residence.

But, if you are trying to pick a home based on its perceived value, you’re missing the point of a long term investment plan. If you’re trying to hit it big in a short period of time, you’re effectively gambling.

Appreciation is what you see and hear in the news all the time; house prices are rising or falling. Long time investing shouldn’t be concerned with this because after 20-25 years, someone else has paid for the property completely and it only cost your deposit.

If a house was bought for $750,000 and it sold for $850,000 20 years later, it only cost the deposit. Appreciation is a bonus when investing long term.

The old cliche of real estate is location, location, location. Use this to your advantage in either a personal residence or an investment scenario.

Deciding on an area that has seen steady appreciation over the past number of years is a great indication that it is a sound area to live or invest in.

Cash flow vs. Appreciation


If you are looking to buy an investment property in Toronto, your cash flow may be non-existent, in fact, it may cost you money monthly. You would be purchasing an investment property in Toronto so your tenant is paying the bulk of the carrying costs while the property appreciates. With patience, once a tenant leaves, you are free to set the rent price higher and by then, rents will have gone up and now the rent is sufficient to pay the carrying costs entirely. Year-over-year rent in Toronto increased 8% and the average price increased 7.68% (2017-2018).

Cash flow 

Cash flow can readily be found in towns outside of Toronto. The rent in these towns pay all of your carrying costs and makes you a monthly profit. The profit is your cash flow. It is money realized upfront where appreciation is not realized until/unless you sell or refinance.

The appreciation in towns outside of the GTA is not as significant and the price point is lower. If you are investing in these towns, a long term approach is a must for appreciation to happen and that appreciation should be looked at as a bonus and not an expectation.

If you’re investing for the long run, appreciation is always your bonus. If you’re looking for a short term gain, you’re gambling the same as you would at a blackjack table and we know where the odds are in favour of there.