If somebody owns a paid off house worth 1.5 million, why wouldn't they sell it, buy a house in nova scotia or alberta for 300k, and invest the remaining 1.2 mil in a conservative portfolio that will easily pay 60k a year without ever touching the principle. Live the rest of their life without ever working again. That's what I'd do, instead of living a stressful life with a job.
Speaking as someone who's done exactly this (we sold our GTA home and moved into a tent for the better part of a decade, putting the proceeds into the market and living off the dividends), it can work out quite fantastically. During that time, our portfolio has handily outpaced the GTA real estate market.
However, this course of action is not without its pitfalls though:
1) There's Sequence of Returns Risk. If you experience a severe market decline the first few years of this plan, this, combined with the ongoing withdrawals to pay for basic living costs, could shrink your portfolio drastically and reduce the longevity of your stash moving forward. We were *very* lucky that we sold out when we did - during the middle of the longest bull market in history.
I'm not going to pretend I'm some kind of stock-picking Svengali. We could have thrown a dart on the stock market ticker sheet and still ended up making money. Everyone and their cousin did well during this period. Things are looking a lot peakier these days. I'd be wary about selling out and buying at the market top, then watching your portfolio decline steadily during a market contraction.
Okay if you're 45 years old and have time to catch the next market expansion. Not so okay if you're doing this at 65, and have to wait a decade for the portfolio to climb back to its break even point.
If you opted to stay put, real estate has a much lower beta than equities, and a broad market decline affecting all assets would see less of a % drop in RE than stocks.
2) There are trade-offs from moving from the city to a lower-cost of living, less populated area. Services that you take for granted, like snow removal, garbage disposal, being able to buy all your groceries from one store instead of doing the "supermarket shuffle", having cultural amenities like ethnic food, theatre and arts, missing the diversity and cosmopolitanism of the people around you, having to contend with the stereotypical "small-town, small-minded thinking". These are the things we're currently struggling with right now, living out in the sticks.
Fortunately the solution for us is BRAAAAAAAP!!!! and that is working quite well for the moment. But I don't see it as a permanent solution. At heart, we're city people and we miss the city.
3) As GG mentioned, you may have a support system in place where you currently live. Either you are being supported via friends and family, or you provide support. When you relocate when you're in your later adult years, it becomes more difficult to rebuild that support system, or relocating those you provide support for. We're very lucky in that our parents our very healthy and independent. If we had to take care of them, this plan would be much harder to execute.
Also, in our experience, rebuilding a network of friends is much harder in a smaller town and when you're older as well. Cliques seem harder to break into in a smaller community than a large city. We had absolutely no problems making friends in Toronto in our 30s, mainly due to shared activities like motorcycling and a much larger pool of similarly-minded people. I don't know if COVID is playing any part of that difficulty right now, but it's definitely been much slower rebuilding that network here and now.
Again, BRAAAAAAAP!!!!! helps out quite a bit.
4) If your portfolio did not match the growth of GTA real estate, then your relocation exercise is basically a one-way ticket. Lower cost-of-living areas equals lower wages. It may be enough to support you out in the boonies or in a developing country, but ultimately, it may mean being priced out of the real estate market where you originally came from. Not a good spot to be in if you found out too late that you don't like where you relocated to.
Feeling trapped and out of options is probably one of the worst feelings in the world.
If selling out and moving to a cheaper area was such a no-brainer, everyone would be doing it.
