# The Sell: a couple with young kids cash out after less than a year in Riverdale

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**The sellers:**Shanna Landolt, the 43-year-old founder and president of executive search company the Landolt Group, and Paul Landolt, a 49-year-old software developer for RBC.

**The property: **A detached four-bedroom Edwardian in Riverdale, which the couple bought for $1.285 million in 2013, and lived in for just under a year with their three young kids.

**The story: **As Paul’s 50th birthday loomed closer, he and Shanna started daydreaming about a simpler life outside the city. Shanna grew up in Brockville, and the couple figured they could buy a house there—for a third of what it would cost them in Toronto—work remotely, and have enough extra cash to rent a pied-à-terre in the city and take regular family trips to the Caribbean. After mulling it over for a bit, they resolved to list the house just before Christmas to see what offers they could attract.

**The prep: **The Landolts’ agent, Suzanne Lewis of Keller-Williams, initially advised the couple to have the house professionally staged. Then, she reconsidered: two homes in the area had sold after receiving 20-plus offers, and some of those disappointed suitors were sure to bid on the next comparable property. So they spent four days de-cluttering and put the house on the market on December 9.

**The offers: **After a flurry of open houses, they received three offers, one of which was slightly over asking. Feeling buoyed, they signed all three back, and all returned with even higher bids. They haggled with the top bidder for 45 minutes, then made a deal for $74,500 over list price—a satisfying sum to put toward a new home base outside the city.

So they walked away with $18 grand or 5% on their investment of the initial down payment (assuming they put down 25% on a 3.5% mortgage amortised over 25-years, $10,000 in closing cost, $10,000 in moving expenses) providing they didn’t to any large cost maintenance items.

Good thing they didn’t listen the agent about the staging.

What was the house actually sold for, though? The story doesn’t say.

It’s on the photo of the house.

thanks. totally missed that for some reason.

I don’t follow your math on this? There is a $184,000 difference b/t what they bought for in 2013 and what the sold for in 2015.

Using the 25% down payment on the purchase price we assume they paid $321,250 upfront. This leaves a mortgage of $964,000.

After a year they would have paid about $30K in interest and about $22K toward their principal. The difference between these is $8k. Meaning they “lost” this amount over the course of the year and it should be subtracted from the total profit of their sale.

So if you take their $184,000 in profit, subtract the $8k as noted above…you have $176,000. Subtract an additional $20k in closing costs and moving expenses (as you did in your example) you have $156,000. Then subtract fees from the real-estate agents (buy and sell side), which would roughly equal 5% of the sale price… or about $73,500, and you end with an approximate net profit of $82,500

$82,500 return on an initial investment of $321,250 works out to a bit more than 25%. That is very healthy rate of return over a one year period. A lot of hassle to search for houses and move twice, but healthy nonetheless

So I had original purchase price of $1,285,000

mortgage of $950,000 (not quite 25% but ease of math)

Mortgage rate of 3.5%

Down payment of $335,000 (again ease of math)

Payments approximately $4,200/month

payment breakdown for first year per month $2,700 (approximately)

Principal paid per month first year $1,500

Here is where our math diverges significantly, I don’t understand how you subtracted the principal from the interest in the mortgage payment, that. The principal is still in the house, they would have had that no matter what so that doesn’t play into the rate calculations. They lost their entire interest payment for the year which is 12 X 2700 which I rounded to $30,000. That’s gone. They paid the bank $30,000 for the year for the pleasure of borrowing the $950,000.

So total expenses:

Mortgage interest: $30,000

Real Estate fee: $73,500

Closing costs and moving $ 20,000

The big difference in our numbers is that I included the LTT which works out to $43,000

Total expenses: $166, 500

Difference between purchase price and sale price: $184,000

and that’s how I got to $18,000 which gave me the 5% ROI

Land Transfer Tax is paid on purchase, not on a sale. Just FYI. And I do realize they’re buying something else but if it’s outside Toronto the amount drops in half, not to mention the purchase price will be a fraction of that.

Yes, they paid the LTT when they bought the house in 2013, they had to pay about $43,000. They don’t get that money back when they sell, so it’s still an expense.

They essentially gave the government $43,000 for living in the house for a year. That rents you a pretty nice place in Riverdale.

Had they used the LTT as rent and invested the down payment, closing and moving costs ($355,000) in an index fund tied to the TSX composite (7% in 2014) they would have walked away with $37,275 (TSX index stocks are eligible for 50% margin giving you a total investment of $532,500) $37,275.

Add to that the savings of the interest they paid for the house, minus the margin interest (2.5% on $177,500=$4,437) is $25,563. Meaning by using the LTT to pay the one year of rent they would have pocketed a cool $62,838 or $44,838 more than they made off the house transaction.