Toronto has seen a boom in investment condos over the last decade. In this time many Toronto condo investors have made a great deal of money. Why? Well, it’s quite straight forward: 1) The local condo market has appreciated a great deal in recent years, in fact, some years the condo market has outpaced the housing market in downtown Toronto; 2) The tenant has paid the mortgage the entire duration of ownership.
Yes, these are “quite obvious” points. But, it’s important to note that tenants are the integral key to this investment equation. Appreciating the tenant’s occupancy during the investor’s ownership of the condo is wonderful, now that it is time to sell it is essential to take key steps to ensure you are maximizing the value despite having a potential “downside” of a current tenancy.
Here are some key points when selling a condo with a tenant:
1. Increase Rent Annually
If you have not kept up with market rents this will impact your Capitalization Rate (Cap Rate), what you need to know here is that the sale value will be lower should your rents be much lower than market rates.
2. Sell When You Have a Tenant Turnover-Period
What we mean by this is: list the condo when the current tenant gives notice. The reason being that your buyer pool will be larger. Not only will have you have a condo investor looking at the condo but the “end-user” condo owner as well. You will not be limiting the buyer options.
3. Be Patient When Listing with a Tenant
The tenant may not keep the condo space as clean and tidy as you would your own home. This could impact the sale price negatively. We always encourage fostering a strong relationship with tenants. Communicate openly and try to work together in a co-operative sense. This could put thousands of dollars in your pocket. (ie., give the tenant some showing windows and the necessary notification of showings).
4. Lease Timing with the Tenant
Ideally, you bring your condo to market when the tenant is month-to-month versus in the early or mid-way point of the contract period. The reason being is that the buyer has more flexibility to take possession as their primary residence if they wish – providing the necessary notice, forms and financial compensation to the tenant.
We have sold many condos that have been tenanted. There is a process that works best, it begins with effective communication, understanding of the current market factors and the go-to-market strategy. We do this as a team to ensure that you leave no money on the table, that you maximize your investment so that you can turn around and get that money working for you in whichever investment vehicle you choose to go with next.