We may invariably be buying at the peak of the housing bubble here in Canada as the chart from The Economist illustrates below. But then again, we may not. Nobody knows for certain where we are in the cycle. But for now, money is cheap with interest rates at 1% and prime rate at 3%, and the real estate market is on fire.
Currently, we are renting a one-bedroom apartment in downtown Ottawa, which isn’t big enough for the two of us and no space for us to grow. The flip-side was that we rent a bigger place but between renting and buying, the difference wasn’t much and we decided that in the long run, we want to own a house. We ended up buying a place which fits plenty of our criteria – something well in our budget, relatively close to downtown, big enough for us to grow into (a 3-bed, 2-bath house), good neighborhood, close to one of our jobs (walking distance from my wife’s work), good school district etc.
This purchase obviously affects our investments and readers will notice a drop in our passive income going forward. I have sold off my mutual fund holdings that I intend to use for our down payment, but still need to sell a few more of our investments to cover our down-payment. I intend to sell off most of our existing ETFs and a couple of high income stocks as I want to keep holding the dividend growth stocks. This upcoming selloff could result in a possibility of us missing our target of $4,000 in passive income this year. But we are still happy about the decision – a lot happier than we ever anticipated.
The closing date is in July and we can’t wait to move into our new house.