Buying A Condo As An
Investment
By: Laurin Jeffrey
A lot of people ask us as part of their
search for a condo, which ones are better investments. Personally, if I knew
the answer to that 100%, I would be writing this from my own private island.
Alas, that is not the case and I write in my home office, looking out at the
snow.
There is no hard and fast rule when it comes to investment condos. A lot of
it depends on what exactly you are looking to get out of it. Some people
think of investment condos as rentals, while others are thinking of sales
value down the road.
If you are looking to buy a condo to rent out, then there are a few factors
you need to consider.
First, don't just buy the smallest and/or cheapest unit you can find. Not
too many people are going to want to live in it - would you? Instead, think
of who your target market is going to be. If you want singles, then one
bedroom condos would be fine. Once you get to couples (with the possibility
of children), then you are going to want to think more in terms of larger
units with two bedrooms.
Speaking of which, there has been a recent hue and cry over the lack of
condos that are suitable for families. Sure, there are a few tired old
buildings with three bedroom units, but they are few and far between. Where
are the new units? What are the options for the families that don't want a
house? Or those than can't afford a house? Before I get to really ranting, I
just wanted to point out that condos need to be equal opportunity. They are
not just for singles or couples or empty-nesters. Some people want to raise
a family in the sky. Time to do something about it. Anyway, on with the
article
Location is also going to have a bearing on your target market, or on the
available pool of renters who will make up your market. If you want
primarily university students, then look to buy near U of T, York, Ryerson,
etc. Don't forget the smaller schools and colleges, such as George Brown or
Sheridan. There are a lot of students in Toronto, so there are a lot of
options for you to appeal to them.
The flip side of course, is that if you don't want student renters, don't
buy near where they would want to live!
If you want doctors and nurses and interns and the like, then you are going
to want to buy along Hospital Row, or not too far from it. Yes, there are
more isolated facilties around the city, but stay close to where the biggest
renter pool is likely to be.
Many people often ask about new condos versus resale as rental properties.
This is a hard one, but my gut feel is that new buildings are not the best
bet. Maybe if you are going for a 1,200 square foot penthouse with a view to
die for, but a simple one bedroom just puts you in the pack with everyone
else. If a 300-unit building has 30 people buy to rent out, you are going to
be facing some stiff competition to get a renter into your unit. You may be
best to simply avoid that sort of competition and look for resales or
smaller new developments.
Speaking of competition, this might be a good time to delve into a
discussion of rents and their recent decline. With all the condo action in
Toronto the past few years, many units have been built and many have been
bought to rent out. As with any market, supply and demand dictate pricing.
When there are more units than renters, there is more and more competition
to get those lease dollars. Thus, rents go down.
Even with a decline in rental amounts, if you are buying as an investment,
you need to look at the larger picture. Don't expect to pay your mortage and
condo fees - and make a profit. Those days are gone. But add up all the
monthly expenses and if you get a rental amount that is not so much less
than you are spending, then you have to think about it more in terms of your
mortgage only costing you $100 a month. Even if it is $300 a month, that is
significantly less than if you were paying everything yourself. You don't
get much for nothing these days, so be happy that someone is helping
subsidize your mortage.
Now, there is another group of people who are thinking more about sales in
the future. Some may be buying a condo off plans with the thought of
flipping it once the building is done. I don't want to repeat myself, but
basically re-read what I said above about buying in a new development to
rent. Being one of the herd is not always a good thing.
It used to be that buying new and selling it after living in it for a few
years was guaranteed profits. Not so much anymore. Land costs and building
costs are up, plus builders know they can get more for their product. Thus
you have to think more strategically these days.
There are three things I generally advise when people ask me what to buy
that will increase over the years.
First is to buy large. Buy as big a condo as you can afford. This is for two
main reasons. The first is as above, so as not to be one of 100 one bedroom
units for sale in a building. The second is that a large segment of future
condo buyers are going to be empty-nesters and downsizers. Many older
couples will be leaving their larger homes and they are not going to want to
live in a 650-square-foot one-bedroom condo.
Second is to look for up-and-coming areas. Of course, that leads to the
question of what areas are up and coming. Anywhere the prices are not
through the roof. Areas where there are very few new developments. Areas you
see or hear or read about. Take the Queen East corridor - that is going to
be the next King West, mark my words. Have you heard the terms Leslieville
or Studio District or Corktown bandied about? There's a reason for that
Third and last is to try to find something as unique as possible. Again,
when it comes time to sell, you need something to help you stand out from
the crowd. Many people don't want the norm, they want something interesting.
Think about a loft, especially a conversion. Something with a unique layout
or different location. Anything that is not the same as 99% of your
competition.
I know this might be a lot to digest, but trust me, read it through and
think about it. There are a lot of options out there and you need to narrow
them down to only the best ones for you. Of course, every situation is
different, but that is why the end result will have a different shortlist
for everyone.
And that is what helps to keep the market unique and allows people to make
money in real estate.
Article Source:
http://www.content.onlypunjab.com
Laurin & Natalie Jeffrey || Sales Representatives
Right At Home Realty Inc., Brokerage
laurin@jeffreyteam.com ||
www.jeffreyteam.com
416-388-1960 || 416-318-7917.
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