Condo Investing: The Perfect Project
Finding the Perfect Investment Condo
There are lots of things to consider when you’re hunting for the perfect investment condo. Not only do you need to find a great suite in a fantastic location, but you also need to be aware of the needs and expectations of the market both now and in the future.
With a seemingly non-existent price ceiling in today’s condo market, intense competition and difficulty getting in on the sales program at the very beginning – the prospect of snapping up a unit or even multiple is very attractive but sometimes a challenge. Of course, there’s no guarantee that prices will continue to rise, although we’re unlikely to see any sharp declines, and will more likely see prices stabilize. This means that a condo remains a solid investment, but it’s far from an easy money-maker.
If you want to ensure a decent return on your investment down the road, you need to make some wise decisions when purchasing your unit. There are tons of options out there and not all developments are built equally.
Our job is to help you to evaluate all the potential investment opportunities and identify the one likeliest to help you reach your financial goals.
Check out our top condo investment tips to help you make a profitable location and project choice.
Tip No. 1 – Create a Business Model and Strategy.
A business model is an investor’s plan for making a profit. Long-Term or Short-Term.
People invest in property for many reasons, with some wanting to generate rental income to help pay the mortgage and others searching for a way to build equity on a long-term basis. While these two scenarios are not mutually exclusive, it’s important to have a plan of attack before you purchase a condo. Along with deciding how you will capitalize on your investment, it’s also important to think about timelines.
Your end goal and exit plan should influence your decision of where to buy, with some neighborhoods more likely to have a strong rental market and others more likely to experience healthy capital growth.
Tip No. 2 – Know Your Budget.
How much cash you have for a down payment will help to guide you to the right product. For example, if you have less than $70,000, you’re a better candidate for a resale condo investment property over a pre-construction condo. Today, you will need approximately 15% deposit paid within the first year. You will also need to budget for closing costs.
Read: Pre-Construction Closing Costs
Tip No. 3 – Location: the neighbourhood.
If your condo investment strategy is all about equity gains, look to Toronto Neighbourhoods that are on the rise. If you can invest in areas when prices are low, you’ll reap the benefits in the years to come. More than just being on the look-out for a new Starbucks on the scene, commonly referred to as the Starbucks effect there are other indicators that a neighbourhood is up-and-coming:
That tendy built-up area – you’ll initially be spending more.
A unit in no man’s land – you run the risk of holding onto an investment that doesn’t appreciate at the rate you might have expected.
Tip No. 4 – Location: Regional Growth and Revitalization.
Look for neighbourhoods receiving infrastructure upgrades.
Tip No. 4 – Transit Score.
Consider the current and future proximity to transit. One fail-safe is looking for new condo developments along subway lines. The same goes for future transit lines.
Condos are all about convenience — maintenance-free city living with plenty of amenities close by. Living close to transit is convenient and not just for renters. Condos near transit systems retain value and achieve higher rents. Whether it’s downsizers who want to ditch their car on weekends or young professionals commuting to city jobs, access to transit will be key.
Tip No. 5 – Walkability
How close is your condo to, well, everything? Driving is a serious drag, and people want to live in the heart of the action. Ideally, you want a place with a walk score of 90-100, a so-called “walker’s paradise”. Basically, a place where daily errands don’t require a car. Plus, you can rent out your parking slip.
Tip No. 6 – Lifestyle Factors
Before investing in a condo, it’s important to understand what drives the market. Lifestyle factors are a key consideration, with people often choosing to live in condos as a way to improve their quality of life.
Whether you’re investing in a holiday condo or a trendy inner-city condo, you need to be aware of the lifestyle benefits of condo living. From the culture of the surrounding area through to the sense of community that exists inside the building’s walls, when you’re buying a condo, you’re buying into a particular lifestyle.
Tip No. 7 – Community Amenities
It’s a bonus if there are amenities such as restaurants, dry cleaners, hospitals, schools parks. Amenities which support your lifestyle.
Don’t forget about the areas surrounding established neighbourhoods. As those neighbourhoods grow in popularity, gentrification and new condo supply starts being added adjacent to these high-value neighbourhoods.
Tip No. 8 – Community Demographics
Who lives there? Is it a community of young professionals, families, students? Remember, these are your prospective renters. To get demographic info, check out Toronto’s neighbourhood profiles, all generated from 2016 census data.
Tip No. 9 – Your Target Audience (Tenant)
You have a target audience for your purchase: the eventual tenant of your property, or future buyer if you’re looking to sell right away.
Who is your ideal tenant?
Student: then a multi-bedroom unit close to transit or university/college is important and a quick walk to a grocery store.
Young Family: then a condo with family-friendly amenities and location is key. Look for multiple bedrooms, nearby parks and recreation, and proximity to top elementary schools. Extra points for commuter access, too..
Young families and urban singles: are the top markets for amenities. If your target audience is a young family, then look for family-friendly amenities like “hang-out” rooms, movie spaces, and parks.
Professionals: then picking a “hot” neighbourhood is key. Look for proximity to all kinds of transit, trendy shops and dining, top employers, and hip cultural centres.
Tip No. 10 – Market Factors & Project Comparables
Firstly, you can look at historic growth patterns by month, quarter, and year, which should give you a good indication of how much growth certain neighborhoods are experiencing. It’s always important to distinguish the condo market from the wider market, and look at how growth rates are changing over time.
What’s the resale for comparable units in the same neighbourhood? How about the percentage of units sold? What has the average price per square foot for condos sold been? What about rental prices? If you will be renting out your unit, be sure you’re investing in a hood that sustains higher rents. Because higher rents = more cash flow.
Top No. 11 – Condominium Amenities
Modern condos often include amenities such as swimming pools, gyms, entertainment areas, saunas, rooftop terraces, BBQs, and more. Because these facilities are shared with other people living in the community, residents can enjoy them without the huge financial outlay of ownership. If you’re investing in a condo as a way to generate rental income, a dwelling with lots of amenities is a great way to attract tenants. While the inclusion of amenities will raise the price of a condo, renters will pay much more for condos with extras.
Traditional amenities such as pools and gyms are often not enough with developers also including technology and wellness features in order to stand out from the competition. From fiber optic Internet and automated cleaning through to security systems and electric vehicle charging stations, smart devices are more important than ever. Health and fitness amenities are also an important part of the condo lifestyle, with yoga and wellness facilities joining gyms and tennis courts as they become part of the wider condo experience.
Read Next: Find that Perfect Suite!
Getting involved in the property market demands serious contemplation. From saving a deposit and researching the market through to obtaining finance, there are many things to take into account. At the end of the day, investing in a condo can be a safe and profitable way to capitalize on your investment.