Take a moment and look out the window or look up while in downtown Toronto. How many construction cranes do you see? 20? 25? 30? I can count at least 25 from just about any part of downtown. There is no doubt that condos are the future of Toronto, in fact, many would argue we are already living in that future. The last ten years have seen unprecedented growth of condos in Toronto. Much of this enthusiasm has been driven by a couple of factors: 1) Toronto’s population is growing so quickly that we need more living spaces, since very few purpose-built rental apartments are being built we have condos; 2) The condo investor is driving the purchases of these condos.
It’s one thing to accept that there is more growth to come, another to say that money is to be made by investors, but I cannot tell you how often little mistakes are made along the way by condo investors. Are condos a good investment? If the market co-operates, then it’s no big deal, right?! Not so fast, you cannot rely on the strength of the real estate market to patch up the mistakes that many condo investors make.
Click Here For Questions to Ask When Buying A Condo!
4 Top Condo Investment Mistakes:
1. Pre-Construction “Hype”:
Over-hyped – we see this ALL the time. Some projects are the darlings of the media without any fundamental strengths either in the neighbourhood or the quality and experience of the builder. See the next mistake to best avoid this mistake. There are some buildings that are all hype and no substance – hip marketing campaigns does not equate to quality investment.
2. Not Using A Realtor For Pre-Construction:
Developers have their own sales teams. This team is paid to get you to buy their development – NOT to help you get what is best for you! Hiring a professional realtor will ensure that you acquire what best suits your needs and investment objectives. Your own realtor will give you exposure to all of the developments and re-sale options. Don’t worry about paying the realtor, the builder has a budget set aside for this, and it does not impact the purchase price in any way.
3. Future Planning For Pre-Construction:
Keep in mind that when you purchase pre-construction that it could take up to 3-4 years to complete. You may have also tied up to 25% of the purchase value with your downpayment. Is this the best use of your capital for four years? It’s a speculative play.
Where do you expect to be in 4 years? Can you cover the mortgage when the time comes? Will you need this capital for a growing family in the meantime? The list goes on and on. We ask the full gamut of questions to ensure that you are well informed about the potential pitfalls.
4. Thinking Re-Sale Condos Are Not As Good As Pre-Construction:
Many clients come to us asking about pre-construction, thinking that this is the best investment. It may be, but it also may not be. Pre-construction is typically 20% more money than resale. You also do not know precisely what the building will look like on completion, what the views will look like, whether the developer will change the square footage on you, when it will close and what the market will be like once it closes. Will it appraise for what you purchased it for? There are a lot of questions marks when it comes to pre-construction. Alternatively, you can get a great re-sale condo and know exactly what today’s value is, what the views are, what the building looks like, and what today’s market rents are. You have clarity when it comes to your investment. You are getting your money working for you today.
There are pros and cons to re-sale and pre-construction investment condos. We pride ourselves on helping our clients navigate the market and feel confident that their money is working for them.
Are you ready to start looking for an investment condo, call us. We are here to advise you today and in the future – we don’t just help our investor clients purchase we act as real estate advisors for years to come. We suggest when to buy again, trade-up, and re-finance.