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Should I Invest in a Condo?

calendarFebruary 21, 2020

peopleThe Mortgage Advisors

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Not sure if you should invest in a condo over another form of real estate? In most cases, condos can be an exceptional investment opportunity for both new and seasoned investors, but it may not be right for everyone. Learn more about the differences between investing in a condo vs. a single home, to find out if it’s the right option for you.

Easier to Qualify For

In general, condos are a more affordable investment than a single-detached home. They often have lower price tags, require smaller down payments, and are easier to qualify for. With the introduction of the mortgage stress test in 2018, qualifying for a home in many major Canadian cities has become more difficult for many would-be investors who do not have the extensive capital to put down on a 4-unit home or multi-residential property. If you are just starting out, investing in a condo is an easier way to get into the market.

Lower Out of Pocket Expenses

In most cases, a condo will have lower expenses to cover than a home because of its size. You can expect lower monthly heating, cooling, water, and electricity fees. The insurance will also be lower as the condo association will cover a majority of it under their Master Insurance Plan. An insurance policy for a house can easily cost double for the same square footage as a condo.

Less Maintenance and Repair Costs

Maintenance and repair costs can quickly turn a good investment into a bad one. The average repair and maintenance fees on a single-detached home are 3-5% of the value per year which equates to tens of thousands of dollars annually. On the other hand, a condo will come in around $65 per square foot in Toronto, one of the most expensive markets in North America. Plus, when you own a condo, you are not responsible for maintaining the building, the grounds or the common areas. You pay a monthly maintenance fee that will cover snow removal, ground maintenance, common area upkeep, the roof repairs, HVAC maintenance, etc. This can be a major benefit to beginner investors who don’t have the experience, energy or money to regularly maintain a property on their own.

Location, Location, Location

Condos are often built in desirable locations – urban centers, near mass transit, employment hubs, and amenities. Purchasing a condo in a highly sought-after location can provide you with the benefit of property appreciation, and if you plan to rent, a steady influx of potential tenants.

Demand Is High

A majority of young people do not have the funds to buy their own property at this stage, which presents a big opportunity for investors to rent out their condos in urban centers close to universities and employers. And with the number of people retiring who are looking to downsize, baby boomers are starting to re-enter the housing market again with many looking to rent or purchase in amenity-rich areas. This creates a major opportunity for condo investors to rent out their space and to even take advantage of selling their condo for profit as the demand spikes. Looking to invest in a condo? Contact us at the Mortgage Advisors and we’ll help you get the financing you need for positive returns.
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