With the deadline for RRSP contributions now behind us, retirement may have been at the forefront of your mind. Particularly when there seems to be an increase in the voices out there warning that more and more people will be working beyond retirement age not because they want to, but because they have to. When you hear statistics like 50% of Canadians will be carrying a mortgage into retirement, or 24% see their home as their source of retirement income, giving retirement a bit more thought, whether you're five or fifteen years away, could go a long way to ensuring you have the type of retirement you want and resources to fund it!
When it comes to downtown living and retirement, there is definitely a trend toward people planning to sell their current home (whether in the City or the suburbs) and downsizing to a condo so they can enjoy the amenities a big city has to offer. The other convenience retirees see with a condo is it allows them to travel (which tends to be at the top of the list for most people when they retire) without having to worry about security or maintenance. While a condo can be a great option for retirees, another option that can meet many of the same conveniences, but also be a funding source, is what I've called, a "Travel Triplex." I've used the term because alliteration makes things sound cooler, but what I'm really talking about here is any multi-unit property in which you can live in one unit and generate income from one or more other units in the property.
If you're planning to move to the City from the suburbs or even from a home to a condo, consider the benefits of purchasing an income property you can live in. Hopefully, you're home is paid for or almost paid for, or you have a big chunk of money for a down payment. The first thing this does is either let you purchase such a property outright or with a small mortgage that is paid for by tenants, rather than your retirement savings/pension. If you don't have a mortgage, the travel triplex allows the rents (or the majority of them) to cover your property's maintenance expenses, insurance, utilities, and of course travel! Depending on the income, such a property could actually become your pension plan if you don't have other resources. As a condo owner you don't have this option, and while you're not doing the maintenance to maintain the property, you're still paying for it via your monthly fees.
When comparing the idea of owning a travel triplex to the condo lifestyle, people like being able to lock the door of a condo and board a plane to their next destination. Well, you can do the same thing with an income property. It all comes down to tenant selection. Because you're going to be living in the property you'll take care as to whom you rent to, but if you pick someone that is willing to do outdoor maintenance and look after various aspects of the property, they essentially end up acting as a pseudo property manager. And while you're away, this person can look after the property for you. You may have to provide some compensation to the tenant, but you'd be doing the same in a condo. If you want to be even more enterprising and generate additional income, you could even rent out your unit during those times when you're away on a short term basis with a service like airbnb.com. The other option, which may cost you more, is to hire an actual property manager. Personally, I don’t think this is necessary if you only have the one property, but it all depends on your comfort level and financial resources.
In a triplex I used to own, I used this system of having one of my long term tenants manager things for me. He took care of the outdoor maintenance in the winter and summer, as well as stick handled various repairs for me. In return I gave him a break on the rent and when he asked for a longer garden hose to water the lawn and plants, I got it for him!
Another consideration you might be thinking about is that long term you want to be living in a property without stairs. This is a valid point, but when you're purchasing your travel triplex you can achieve this by ensuring there’s a ground floor unit that doesn't have stairs. You may even decide to live in an upper unit for a while and switch to the ground floor unit in your later years.
In Toronto's current real estate market, those who own a home have experienced the benefits of home ownership when it comes to appreciation in property values. The benefit of making a travel triplex part of your retirement assets is you have the potential to continue getting this benefit as a home owner, combined with the income potential to fund your retirement. In addition, your travel triplex becomes an asset that you can leave to your children, which may end up helping fund their retirement!
