Investing in condos can AND should result in a lucrative exit strategy for those that know what they are doing. If for nothing else, investing in condos is not unlike investing in their single-family counterparts: there’s no reason a sound strategy can’t pad your coffers with a little extra profit. It is worth noting, however, that condos tend to appreciate at a slower rate than single-family homes, so the benefits tend to be the result of more long-term strategies that witness owners rent out their properties to capitalize on today’s historically high rent prices.
Are you interested in investing in condos this year? If so, take a look at this primer before you take the leap, or contact us now to get start by clicking here.
There are plenty of similarities between investing in condos and houses, but that doesn’t mean there aren’t differences that warrant your consideration. As I already alluded to, condos tend to appreciate at a slower rate than their single-family counterparts. As a result, more investors tend to buy condos for their long-term viability. In other words, most condos are purchased as buy and hold properties to rent out. In Toronto, it is estimated that 68% of all condos are rented out.
SOMETHINGS TO WATCH OUT FOR
On the surface, condos and single family homes are more similar than they are different. That said, investors can’t ignore the differences that exist between the two types of properties. If for nothing else, it’s their differences that will persuade you to choose one over the other.
If you are otherwise unsure of which exit strategy to pursue, I recommend asking yourself a series of questions to help differentiate between the two. And to make things easier on yourself, here are some of the most important questions you can ask yourself if you are trying to decide between investing in condos or a home:
- What are the lender requirements for each? Does the financing you already have lined up favour one property type over the other? Condos and homes will have different requirements for borrowing money, so make sure the one you choose works for your strategy.
- How long do you plan on keeping the investment? History suggests homes have a better history of appreciation.
- Does the development have a rental cap/restriction? Some developments have a rental cap, which restricts the number of units that can be rented out. Pay special considerations to not only the rental cap requirements, but also the condo corporations rules that could impact your investment.
- Which location is better? More often than not, the location of a property will have a huge impact on future performance. If you are choosing between a condo or a house (all things being equal), you may want to consider the one in the up-and-coming location.
- What sort of Condo Corporation are you dealing with? Some Condo Corps. are very strict, whereas others are nonexistent. Determine your tolerance and factor it into the options made available to you. Purchasing a condo with a great management company and it may help its value, but future renters may not love the rules they will be expected to follow.
When all is said and done, investing in condos isn’t all that different from investing in homes; the basic tenets still apply. The idea is to purchase a home with positive cash flow; it’s a simple as that. However, there are several important questions you will want to know the answers to before you commit to one or the other.
CONDO INVESTMENT TIPS
If you are looking to invest in condos sooner rather than later, may I offer you some of these tips? The obvious one is to contact us directly here, the rest are as follows:
1. Chose The Location Wisely: Seeing as how most condo investments are long-term strategies, it pays to pay special considerations to the location you buy in. That’s not to say location isn’t important with every other strategy (it is), but since they are typically rented out, it helps to buy a condo in an up-and-coming area. In fact, you could very easily argue that the area is a lot more important than the property itself. That said, I highly recommend doing your research before you buy. Ask local realtors how the prospects are. Try to identify any future projects in the area. Are there any schools or malls going in?
2. Don’t Ignore The Condo Corporation: Most condo developments come complete with a condo board. As such, it’s in your best interest to weigh your decisions with that in mind. Some condos come with hefty monthly maintenance fees and strict rules, whereas others may not exercise their powers at all. That said, there are certainly pros and cons to buying condos with them already in place. It is up to you, however, to determine whether or not they should impact your decision.
3. Amenities Are A BIG Selling Point: The whole idea behind renting out a successful property is to create a sense of demand. In doing so, you see to it that your home doesn’t remain vacant, and that it can ask for competitive rental prices. That said, it’s my professional opinion that condos come with an inherent level of demand. If for nothing else, most of them come with pools, gyms, parks and other amenities renters might find attractive.
INVESTING IN PRE-CONSTRUCTION CONDOS
There are arguments for and against the idea of investing in pre-construction condos. That said, the direction you choose isn’t contingent on a universal answer, but rather a case by case scenario. You see, there are benefits to investing in pre-construction condos, and there are benefits to investing in existing inventory. What’s more, each option comes complete with their own drawbacks as well. The path you choose should really depend more on what you hope to get out of the property and what your endgame is. We cover this topic at a great depth with our clients, and we would love to hear from you to walk you through all of your options.