Top 7 tips for buying an investment condo

If you have invested in a condominium suite in Toronto or elsewhere in the Greater Golden Horseshoe, congratulations. Real estate ownership is a favourite for people’s investment portfolios because of the typically substantial return-on-investment they enjoy over time. If you have bought a new condo suite to rent out, double congratulations! Condos are providing badly needed rental stock in the city and the 905 areas. Perhaps you are thinking about investing in a condo but are unsure about how to know if it is a worthwhile step.

Here are a few tips to help you decide.

1 Do the math

Add your mortgage costs to your condo fees and property taxes, and then look at what you can rent for. Your real estate agent should be able to help you with that. Say you can rent for $2,000 per month and your costs are $2,050, you know how much extra you have to contribute.

2 How about equity?

Looking at the past decade, investors have earned about eight per cent on average, keeping in mind that 2016 was an anomaly with a 30-per-cent rise.

3 Looking at a new condo?

Ask your real estate agent to research the last six months of sales. Balance your costs and the historical data of the average increase in value – both in condominium sales and in the surrounding area. In that location, have people gained in the past few years?

4 Check the builder

Research the track records of the builders you are considering. Compare building amenities and ask about Green features that may lower utilities costs.

5 Resale condo?

If you are looking at a resale condo, ask for the building’s status certificate as part of your due diligence. This document confirms the status of the reserve fund and outlines any changes, repairs, upgrades or special assessments that are planned and might up your fees.

6 Location, location, location

Remember that real estate is all about location, and the first rule of rentability is access to transit. Many renters do not own cars, so living near transit nodes is a must. Local amenities they can walk or bike to also add desirability. Consider up-and-coming areas, which are usually more affordable. You will find better price points, and these locations will likely go up in value dramatically once local amenities and transportation access are added. A building close to future transit is often a better investment goal than a downtown address.

7 Screen your tenants

Before renting, check applicants’ credit backgrounds, and make payment arrangements.

Keep in mind that investing always involves some risk. Historically, however, real estate has done well. Real estate is the “investment of the masses.” It is tangible, understandable and less risky than stocks and bonds. Just think of how happy those who purchased condos 10 years ago are today!

Real estate continually represents one of the strongest elements of our economy. The best advice I can give to both investors and end-users is to buy sooner rather than later.

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