Supply and demand, economic conditions and population growth will all impact your condo suite’s rental potential. Unfortunately, these factors are not in your control. What you can control, when it comes to the housing market, is whether you buy here and now, or wait for more suitable conditions.
Purchasing your investment condo at the right time and in the right place, then selling when values hit a high point, is just part of the story. Between the “buy” and the “sell,” there’s money to be made.
While you let time work its magic and watch your property appreciate in value (as it historically has done) you can rent your condo unit and earn while you wait. It sounds easy enough – if you can give the renters what they want.
We conducted The Great Canadian Real Estate Survey to find out what people are looking for in a new condo. Then we asked some condo experts and investors where these “most rentable” items fall on their scale of importance. As it turns out, what’s good for the goose is good for the gander – most of the time.
Location, location, location
Experts agree: Transit-oriented locations lead straight to the bank.
Location, location, location has always been the mantra of great real estate, and now is no different, whether you’re a condo renter, owner or investor. Our regional condo experts agree, this is one “rentable” factor that definitely pays off.
“The golden rule for investors is to select a condo close to public transit,” says “the condo pro” Barbara Lawlor, president and CEO of Baker Real Estate. In addition to being free of traffic jams, Lawlor says being car-free is a double win in this pricey housing market: “With housing prices the way they are today, many buyers and renters do not own cars, which helps with home affordability, too.”
It’s the same story in Vancouver – which happens to be Canada’s priciest housing market. Opting for public transit over vehicle ownership leaves more money in future homebuyers’ pockets for their down payment.
Money aside, it’s still very much about the lifestyle.
“We are seeing a trend toward transit-oriented communities for accessibility and convenience, such as Cambie Corridor, Burquitlam, Brentwood and Metrotown,” says Cameron McNeill, co-president of MLA Canada, a leader in residential real estate services with the largest in-house analytics and advisory group in Western Canada. “There has been a shift to one-car families or individuals preferring not to own a vehicle, and these groups want to be within proximity to both transit and car-share programs.”
Whomever said size doesn’t matter, was wrong. Yes, small suites are more affordable up-front, but think beyond that initial cost and consider a long-term investment in livability.
Experts agree: Bigger is better – and more easily rentable.
Why? Compact suites are a red flag to renters, who equate their small size with lifestyle compromises.
“Size is important,” says Cole Romaniuk, a condo investor, real estate broker and condo property manager at Calgary-based Karen King & Associates Inc. “I find that two-bedrooms rent significantly faster than one-bedrooms. It’s a critical threshold of livability – that 700-sq.-ft. sweet spot where a lot of condo investors sit. As soon as you go below that threshold, renters see it as having to make sacrifices on their lifestyle.”
A demographic shift in the renter is increasing demand for larger suites. It’s not just the young and the restless who are looking to rent. Young families are opting to rent in Canada’s hottest markets, in direct response to unaffordable housing prices.
But it’s also gaining popularity as a lifestyle choice among the more-mature market segment. “The willingness of downsizers to rent has been an interesting development,” says Shaun Hildebrand, senior vice-president of Toronto condo market research firm Urbanation. “Demographic trends suggest this will be a key area of growth going forward.”
Amenities? Thanks… but no thanks
Experts agree: This one’s a dud
You might think a condo with a swimming pool or lounge might appeal to renters, but walk into one and, in most cases, you’ll rarely find it in use.
According to our experts, amenities like this don’t appeal to investors either. Building amenities don’t yield much of a return in rental income, according to popular expert opinion – especially a pool.
“In this day and age, it’s not a desired amenity,” says Romaniuk. “New condo builders aren’t including pools, and a lot of the buildings that do have them are aging, which can be a significant cash crunch for investors when it comes to condo fees.
“The average cost to operate a pool year-round is between $30,000 and $50,000. When you think about that on a price-per-unit basis, it’s a lot of money just to maintain a pool that doesn’t get used very well.”
Romaniuk admits he steers investors clear of pools. “The investor won’t get a return, but it’s something they pay for in their condo fees.”
So now that we’ve established what costs, let’s find out what pays.
According to The Great Canadian Real Estate Survey, the most desirable amenity among end-users, isn’t technically an “amenity.” It’s a parking spot.
Hit the brakes… huh?
“Parking will absolutely increase the rent, especially downtown in a major city,” Romaniuk confirms. “Two parking stalls is an automatic rent booster,” he says, setting your unit apart from your two-bedroom competitors with only single-vehicle parking to offer.
The survey named the second most-popular amenity as “adjacent retail.”