Lots of people ask us as a part of their search for a condo, which ones are higher investments. Personally, if I oknew the reply to that one hundred%, I’d be writing this from my own private island. Alas, that’s not the case and I write in my residence office, looking out at the snow.
There is no hard and fast rule on the subject of funding condos. A lot of it is determined by what precisely you are looking to get out of it. Some individuals think of funding condos as rentals, while others are thinking of sales worth down the road.
If you’re seeking to buy a condo to lease out, then there are a couple of factors it is advisable to consider.
First, do not just purchase the smallest and/or cheapest unit you possibly can find. Not too many people are going to wish 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 could be fine. Once you get to couples (with the potential for children), then you will wish to think more by way of larger models with bedrooms.
Speaking of which, there has been a current hue and cry over the lack of condos that are suitable for families. Sure, there are just a few tired old buildings with three bedroom items, but they’re few and far between. Where are the new units? What are the options for the households that do not desire a house? Or those than can’t afford a house? Before I get to really ranting, I just needed to level out that condos have to be equal opportunity. They don’t seem to be just for singles or couples or empty-nesters. Some people need to elevate a family within the sky. Time to do something about it. Anyway, on with the article…
Location is also going to have a bearing in your target market, or on the available pool of renters who will make up your market. If you want primarily college students, then look to buy close to U of T, York, Ryerson, etc. Do not forget the smaller schools and faculties, such as George Brown or Sheridan. There are a number of students in Toronto, so there are quite a lot of options so that you can appeal to them.
The flip side in fact, is that if you do not need student renters, do not buy close to the place they would need to live!
If you want medical doctors and nurses and interns and the like, then you’ll need to buy alongside Hospital Row, or not too removed from it. Sure, there are more isolated facilties around the metropolis, but keep near where the biggest renter pool is prone to be.
Many people typically ask about new condos versus resale as rental properties. This is a hard one, but my gut really feel is that new buildings usually are not one of the best bet. Possibly if you’re going for a 1,200 sq. foot penthouse with a view to die for, however a simple one bedroom just puts you within the pack with everyone else. If a 300-unit building has 30 folks purchase to rent out, you are going to be going through some stiff competitors to get a renter into your unit. You might be greatest to simply avoid that form of competition and search for resales or smaller new developments.
Speaking of competition, this is perhaps a superb time to delve into a dialogue of rents and their latest decline. With all the condominium action in Toronto the previous few years, many items have been built and lots of have been bought to lease out. As with every market, supply and demand dictate pricing. When there are more units than renters, there’s more and more competitors to get these lease dollars. Thus, rents go down.
Even with a decline in rental quantities, if you are buying as an funding, you have to take a look at the bigger picture. Do not expect to pay your mortage and rental charges – and make a profit. Those days are gone. But add up all the monthly expenses and if you get a rental quantity that’s not a lot less than you might be spending, then you have to think about it more when it comes to your mortgage only costing you $one hundred a month. Even if it is $300 a month, that is significantly less than if you have been paying everything yourself. You aren’t getting a lot for nothing these days, so be completely satisfied that someone is helping subsidize your mortage.
Now, there may be another group of people who are thinking more about sales in the future. Some may be shopping for a apartment off plans with the considered flipping it once the building is done. I don’t need to repeat myself, but basically re-read what I said above about shopping for in a new development to rent. Being one of the herd shouldn’t be at all times a superb thing.
It used to be that buying new and selling it after dwelling in it for a number of years was guaranteed profits. Not a lot anymore. Land prices and building prices are up, plus builders know they’ll get more for their product. Thus you have to think more strategically these days.
There are three things I typically advise when people ask me what to buy that may increase over the years.
First is to buy large. Buy as big a rental as you’ll be able to afford. This is for two major reasons. The primary is as above, in order to not be one among one hundred one bedroom items for sale in a building. The second is that a large section of future apartment patrons are going to be empty-nesters and downsizers. Many older couples shall be leaving their bigger houses and they are not going to need to live in a 650-square-foot one-bedroom condo.
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