It’s not exactly secret that real estate prices in Toronto are astronomical. Many buyers are turning to condos as a (slightly) more affordable option than freestanding homes. We spoke to Barbara Lawlor, president and CEO of Baker Real Estate Incorporated,
When is the best time to buy a condo for investment? Pre-construction, during, post or even several years after it’s been built? During pre-construction, investors who buy early in the process get the best choice of available suites, as well as the best price. Buying preconstruction also gives you time for your deposit to work for you. Very often, investors experience an uptick in their equity by the time they close a few years later. With interest rates still incredibly low and prices most likely rising even more, the best advice I can offer is to buy sooner rather than later.
But we’ve all heard about condos that go way over the scheduled time frame for completion. What sort of recourse do buyers have in that case? This is all governed by Tarion Warranty Corporation. Condo purchasers must read their Tarion agreement, which states the occupancy date and all extensions available to the builder. Both the buyer and the builder sign the Tarion agreement, which specifies your dates and what recourse you have if the builder does not meet them.
Basically, if the builder hasn’t completed the condo by the end of the stipulated time, you have two choices: to opt out of deal and get your deposit back, or to sign in and give the builder permission take extra time and go forward. This is a big investment, so read the agreement and know up front where you stand.
What are the things to look for when buying a condo for investment? Do they differ from what you look for when you’re buying to own and live in a unit? They are indeed different. Investors must consider the wants and needs of their target renters. Taking those into consideration, buy in the very best location you can afford and make access to transit tops on your list. Many renters do not own vehicles. Research the builders whose condominiums you are looking at. Do they have track records for success? Consider the amenities in the buildings, since these are important to end users. Let’s face it: convenience is a major reason to choose condo living. Also, ask about green features, since renters pay attention to things like utilities costs.
What have the trends in Toronto looked like for condo investors? Investors in Toronto condos represent a huge part of the buying public. Thus far, condos have proven to be a really solid investment, with year-over-year gains. Globally speaking, Toronto is young when it comes to this concept, but we are following in the path of cities such as London, Paris and New York, where the cost of real estate is astronomical. The concept of owning a condo suite as an investment is gaining in popularity in Toronto and the GTA, partly because of affordability. Many who want to invest in real estate can’t afford to buy houses.
How much do condo fees factor in to rental fees if the owner opts to rent the condo out? When it comes to determining rents, condominium investors should be concerned with covering property taxes, maintenance fees and the mortgage. If you put 25 per cent into your investment, the rent should cover the other 75 per cent (monthly mortgage payment, maintenance fees and monthly portion of property taxes). Of course, there is always the potential for the uptick on equity, but most people look for the “25 per cent in, 75 per cent rent coverage” formula.