Are Condos Profitable Investments? Here’s What You Need to Know
Thinking about investing in the condo market? Keep reading to reveal the top three important things to keep in mind before making a big commitment.
Buy to rent
Play the “maintenance-free” card
Wondering if condos are a profitable investment opportunity? In the short term, it all depends, but in the long run, condos are generally a safe bet. Investment properties come in different shapes and sizes. While this is a debatable topic in the real estate industry, some experienced investors swear by investing in the condo market while others are adamant about investing in other real estate properties. What is unchallenged is that real estate is an excellent investment and a great way to cover rental expenses, mortgages, maintenance, and, if done correctly, generate additional income.
Most condos tend to be less expensive than houses, commercial property or land that requires development. According to the National Association of Realtors’, condos are often the most affordable homeownership options for first time home buyers, seniors, small families, and single people. That being said, investors need to be cautious and consider things like the cost of living in the area, as well as the homeowners’ association fee (HOA fee). The thing about investing in the condo market is – you really can’t go wrong long-term. The market has been known to skyrocket in value, allowing investors to turn a quick and significant profit, but so much of that is dependent on location, timing, and frankly, a little bit of luck.
So, let’s say you’ve purchased a condo, and everything that can go wrong has gone wrong with your investment. Don’t panic. Since the condo market is high in demand, there’s an exit strategy if you need to sell. There are many resources out there available to help ensure that all of your I’s are dotted and T’s are crossed when stepping into this big commitment.
According to the Canada Mortgage and Housing Corporation, there are some specific things you should keep in mind before jumping in:
- Check with the developer and municipality about construction plans in the neighbouring area.
- Is the building part of a larger complex?
- What are the plans to build other structures such as a high-rise nearby?
- Could new buildings change the view from your unit significantly?
- Are there amenities, such as pools and parking, and how are they paid?
- Are finishes in the units included in the purchase price?
- Are there other charges over and above the purchase price you should be aware of or hidden costs?
- For example, some developers take out long-term leases on building fixtures, such as furnaces, to save on capital costs. These costs then get passed along to owners.
- Are utilities (gas, electricity, and water charges) covered in the monthly condominium fees, or are they separately metered? (Let’s be real, nobody wants to be paying part of someone else’s utility bills.)
- Are your monthly condo fees realistic?
- Will there be any increase in fees after the first year?
- Is there a home warranty?
- What are the legal regulations?
- How long and what does the warranty cover?
- Get Faris Team’s in-depth Home Buying 101
If you’re on the teeter-totter rocking back and forth on what the right move is for you, contact us, and we will guide you through the best option suited for you.
Buy to rent
It’s the latest trend for millennials to live in extreme, arguably uncomfortably tight quarters, which has sparked a trend to design condos that fit this minimalistic lifestyle. Naturally, these condos are often located in cities, and millennials’ love for urban centres is genuine. People are moving back into the city, so condos are high in demand. They can be a great return on investment as there is endless opportunity to generate rental income. Now that Airbnb, Booking.com, and other third-party rental platforms are booming, renting out properties has become an easier and more efficient way to create a source of additional income. You can also rent out your condo (traditionally long or short-term) to tenants. Something you may want to consider when looking at condo properties is to ensure you’re purchasing in a desirable area with amenities nearby like public transit, schools, shopping, restaurants, etc. You want to purchase a condo where people want to live. They say that money is the key to happiness; however, when purchasing a condo, the key to happiness is the location. Something that condos have that other real estate properties don’t is amenities. Some condo corporations have amenities like pools, a gym, and underground parking that will attract potential renters or buyers.
Play the “maintenance-free” card
Investing in the condo market, you pay condo fees – which ultimately minimizes the responsibility of maintaining the condo, which is a huge advantage to investors. The condo association usually takes it upon themselves to maintain things like the yard, roof, shovelling (this is a huge plus considering we live in Canada), and interior and exterior maintenance. As an investor, you pay condo fees, which minimizes the responsibility on your end to maintain and upkeep the condo, which is a prime advantage for investors when purchasing a condo. While other homeowners are busy maintaining their properties, you don’t have that weighted stress.
Although there is a lot of information to take in, you don’t have to do it alone. At Faris Team, we have a team full of experts in the real estate industry who would be more than happy to answer any questions about real estate investment.