How to live for free in Toronto
Live with your parents or stay in their basements!
Okay, let's talk serious here. Although, I will come back to living with parents shortly.
If you are a single working professional, you can live for free in Toronto if you are creative, smart and money savvy. In order to do so, you need to sit down, analyze the properties with no emotion but pure math. Remember that your first property does not need to be super fancy or match your dream home expectations. That comes later. Your first property needs to be a cash cow for you.
Scenario with Condo
In this example, we are assuming the condo costs $600K and has 2 bedrooms and 2 washrooms. You can either live in one of the bedrooms and rent out the other bedroom and living room to 3 guys. Let's examine the high level analysis below:
Okay, so you are still paying out of pocket $314 every month. This could change if you increase the rent or increase your down payment. Bottom line is, this scenario is awesome and you have appreciating asset while living for free (almost).
Scenario with House
We will use a decent size house here. Let's assume it costs 1 million. It has 4 bedrooms and 2 washrooms, finished basement etc. Here is the high level analysis:
Not only you are living for free, but you are pocketing $787 every month! Which you could put away for unexpected repairs, just to be on the safe side.
You might be asking $5000 rent every month? HOW? Well, if you choose the location wisely, not only you will get amazing rent but you will also get rent from short term rentals such as AirBnB. Trust me, I have seen it first hand. As much we hate it because it creates shortage in rentals, AirBnB is here to stay in a big city such as Toronto.
In cases, where your location does not favor AirBnB as much, you might have to pay from your pocket to cover mortgage and other expenses.
You can apply similar knowledge and concept in other properties and areas. The math is simple and execution is flawless. Remember, what I said in the beginning. Your first property has to be a cash cow.
Living with Parents
To all my younger audience, my advise is live with your parents or in their basement for free and for as long as you can. This is where a lot of you screw up by financing expensive toys. I get it, you are young, you got an image to prove and ladies to impress. Cars are expensive, they depreciate a lot (very few exceptions) and insurance in your young age will cost two arms and a leg. And your first born. Do not do it.
You need to put away that rent money you are going to pay if you did not live with parents. Once you have decent savings, your parents will trust you enough to refinance their property to provide you a bigger down payment. Now you go out there and buy your own property similar to the scenarios above. It would feel much better to be a home owner which one day could very well pay for your toys.
Remember, this is not easy. It takes time, work and discipline. You need to do a lot research and have the ability to screen tenants. You also need to have good relationship with your lenders, contractors etc. It is a long journey, but worth it.