Pro-Athletes, please STOP RENTING!
In honour of the Raptors win at the NBA Championship and the rumours in regards to Kawhi Leonard buying a house in Toronto, this week’s blog is all about why pro-athletes should be buying their properties in Toronto, rather than renting them.
Renting vs. Buying Properties
Most pro-athletes tend to rent properties rather than owning them. For example, a well-known baseball player was renting one of our properties for $10,000 per month for seven months out of the year. That adds up to a $70,000 expense per season. His salary was in the tens of millions per year. It doesn’t make any financial sense to be renting rather than purchasing. The specific property he stayed in could have been purchased for about $2 million and the carrying cost with a simple 20% down was less than $10,000 per month. This would have given the player a nice home to stay in when he was in town for a season rather than going to a hotel.
Down the road if he were to be traded or signed a new contract in a different city, which he eventually did, he would still have had this investment asset in the city with which he can either rent out to another pro-athlete who would pay the $10,000 per month. Either way it is simply financially prudent for pro-athletes to be purchasing a property in Toronto, rather than paying an enormous rent.
Building Long-Term Wealth
Most people have the ability to work as long as they want to work. Pro-athletes on the other hand, have a finite number of years for their careers and they can be one game away from a career-ending injury. We saw this during the NBA playoffs with Kevin Durant and Clay Thompson. Both suffered serious injuries that will unfortunately prevent them from playing next year. Unfortunately Thompson is a free agent, which means that he may not even get that next contract.
By purchasing a property that they can rent out in a major metropolitan center, it allows them to add an investment asset to their portfolio and to build long-term wealth. It’s a great way to set themselves up for when their career comes to an end or early retirement.
Of course, in some cities it may not make as much financial sense to purchase a property. For example, the properties in Green Bay, where the Green Bay Packers football team resides, tend to sit and don’t go up in value. Comparatively, Toronto is a major metropolitan center where we do have long-term growth prospects in the city. If we take another look at the property mentioned earlier and add a 5% growth per year, that owner is earning another $100,000 the next year. If, as another example, we look at Kyle Lowry, he has been in the NBA for 13 years now. If he’d purchased a property 13 years ago when he first moved to the city and kept it as part of his portfolio, the yearly growth would have added up to a substantial amount and he would have easily doubled or tripled his money!
Smart Investments
I can’t blame the athletes though, they are focused on their spot and typically rely on other individuals to make those investment decisions for them. When moving to Toronto, it’s simply smart and prudent planning to buy a property rather than rent.
MLSE, if you want to learn more on how you can set up your pro-athletes with growing investments and wealth that will serve them once they retire, I can educate you and your players on why it makes financial sense for them to buy a property instead of renting them. Even if they are to be traded or their contact is coming to an end, they would still have this asset which will help hedge any loss of income in the future.
To start buying, holding, and adding real estate assets to your portfolio, send and email to contact@alexjwilson.com or call/text me at (416) 996-5181.