Caught in the Condo Dilemma: Options for Homeowners Facing Market Uncertainty

The Canadian real estate market, particularly in the Greater Toronto Area (GTA), has long been known for its complexity and volatility.  The poster (OP), who recently moved to Canada, describes how their decision to buy a one-bedroom condo in Vaughan, Ontario, has left them feeling trapped, facing financial losses and cramped living conditions with their husband and four-year-old child.

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The situation has struck a chord with many homeowners who may be in a similar boat, navigating a turbulent market, rising interest rates, and the often painful reality of buyer’s remorse.

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The Initial Decision: A Double-Edged Sword

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In September 2023, OP and their husband used their entire savings of $65,000 as a down payment on a one-bedroom condo. At the time, their realtor, a colleague of OP, suggested that the condo would be a springboard to a larger home. The rationale was that, with rising property prices, they could potentially sell the condo within a year and make a significant profit, around $50,000 or more. This profit, combined with the couple’s future savings, would be enough to afford a larger home that suited their growing family.

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The idea of getting "a foot in the door" of the real estate market is often touted by realtors, particularly in rapidly appreciating markets like the GTA. But the family’s dream of a quick upgrade has not materialized. As the OP admits, they didn’t consider the full scope of their financial commitment, especially in light of variable interest rates and the hidden costs of homeownership. Now, they’re stuck in a one-bedroom condo, which is proving too small for a family of three, and the market has taken a turn.

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The Reality: Financial Strain and Market Downturn

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Two years after purchasing the condo, the family’s situation is starkly different than what they had hoped for. The property market has cooled, particularly in the condo sector, meaning that if they were to sell now, they would likely lose a significant portion of their original down payment. As the OP points out, selling now could mean walking away with half of what they put in.

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With $110,000 in savings and a condo that isn’t growing in value, they’re left wondering what their next steps should be. The OP laid out two main options in the Reddit thread:

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1. Sell the Condo at a Loss: This would allow them to move on, purchase a larger property like a townhome or semi-detached house, and possibly take advantage of the downturn to buy a larger place at a lower price. However, this means taking a significant hit on their current investment, losing about half of the down payment they originally put into the condo.
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2. Rent Out the Condo and Move to a Larger Rental: Renting out the condo while moving to a larger rental property would ease their immediate space concerns. However, this leaves them vulnerable to market fluctuations, as they won’t be able to afford another home until they sell the condo. Plus, there’s no guarantee that condo prices will rise, meaning they could be stuck with a stagnant or declining asset for years.
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The Reddit Community Weighs In: Stay or Go?

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The Reddit community responded with a variety of opinions on how the OP should proceed. Some offered pragmatic advice, while others presented more creative solutions to mitigate the financial strain.

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Option 1: Stay Put, Ride It Out

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Several users advocated for staying in the condo until the market stabilizes. User Born_Leave4390 highlighted that selling now would mean taking a financial hit on both sides: selling low and buying into a more stable (and likely more expensive) segment of the market, such as townhomes or freehold properties. “Throwing away money on realtor fees multiple times over is just as ridiculous as buying a too-small condo... they made the bed, now they should lie in it,” they commented.

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The crux of this argument is that OP would only be compounding their losses by making a move now, particularly if they must pay additional realtor fees and transaction costs. In this view, it’s better to hunker down, make the best of the current living situation, and wait for prices to recover, even if that takes a few years.

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However, as Medellia23 pointed out, living in a cramped one-bedroom condo with a school-aged child is far from ideal. Sharing such tight quarters can lead to stress, discomfort, and even health issues, particularly if one or more family members are working from home or need space to grow. The emotional and psychological strain of living in a small space should not be underestimated.

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Option 2: Rent Out the Condo, Move to a Larger Rental

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Renting out the current condo while moving into a larger space is another option that gained some traction. This would allow the family to maintain ownership of their condo, potentially allowing them to sell it at a better time, while addressing their immediate need for more space.

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But as Feisty-Anywhere2337, the OP, pointed out in a reply, securing a second mortgage while holding onto the condo would be next to impossible. Even with rental income, their current financial situation would not allow them to qualify for a mortgage on a more expensive property. So, while renting out the condo would help them hold onto it, it doesn’t solve the problem of needing more space now.

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Creative Alternatives: Airbnb and Other Short-Term Solutions

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Some users, like u/OracleofTampico, suggested a creative approach: Airbnb the condo. By listing the condo on Airbnb for short-term rentals, the family could generate income that covers the mortgage, allowing them to move out temporarily. “1br/1b rent well on Airbnb... You can list the apartment on Airbnb without actually moving and see what kind of attention you get,” they suggested.

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This approach offers flexibility and income generation without the long-term commitment of traditional rental agreements. However, Airbnb rentals come with their own risks and challenges, including condo board regulations, fluctuating demand, and the effort required to manage short-term tenants.

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The Dilemma of Upgrading in a Down Market

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At the heart of the OP’s dilemma is the question of whether to sell now or wait. It’s a difficult decision, particularly when the market outlook is uncertain.

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On one hand, selling now locks in losses but allows the family to move forward. The prices of larger homes may also be lower now, which could balance out some of the financial hit. On the other hand, waiting for the condo market to recover could take years, during which time they would remain in an uncomfortable living situation, or worse, the condo could continue to decline in value.

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One Redditor, Narrow_Elk6755, added: “The rule is buildings never go up in value. Ever. Period. Only land can go up in value.” This highlights the fundamental issue with condo ownership: while they provide an entry point into the real estate market, condos—especially in areas with oversupply—may not appreciate in value at the same rate as freehold properties or homes with land.

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The Bigger Picture: Emotional and Financial Balance

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At the end of the day, there’s no easy answer to the OP’s predicament. As several Redditors pointed out, this is not just a financial decision but a personal and emotional one as well. The challenge of living in a one-bedroom condo with a growing child is not insignificant, and the family must weigh the costs—both financial and psychological—of waiting for the market to turn around.

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One user, walliumH, summed it up well: “There is no right decision, and hindsight is 20/20. You did what you felt was the smartest thing to do at the time, sometimes things just don’t work out.”

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For now, the family’s best course of action may be to take a step back and evaluate their current financial situation, as well as their quality of life. Selling at a loss may seem like a hard pill to swallow, but it could provide the immediate relief they need. On the other hand, holding onto the condo and waiting for market conditions to improve might be the more prudent option if they can manage the cramped living space for a little longer.

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Lessons Learned

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This Reddit thread serves as a reminder that real estate decisions are never easy and often come with unexpected consequences. The OP’s experience highlights the importance of doing thorough research, understanding the risks of market timing, and preparing for the long term. While the family’s situation is challenging, it offers valuable lessons for anyone looking to enter—or exit—the real estate market, especially during uncertain times.

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If you want to join the conversation and read the full thread, you can check it out here.

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