A lot of people ask us as part of their hunt for a condo, which ones are best investments. Personally, if I knew the rejoinder to that 100%, I would be writing this from my own hidden island. Alas, that is not the case and I write in my home office, seeing out at the snow.
There is no hard and fast rule when it comes to speculation condos. A lot of it depends on what exactly you are seeing to get out of it. Some people think of speculation condos as rentals, while others are mental of sales value down the road.
If you are seeing to buy a condo to rent out, then there are a few factors you need to consider.
First, don't just buy the smallest and/or cheapest unit you can find. Not too many people are going to want to live in it - would you? Instead, think of who your target shop is going to be. If you want singles, then one bedroom condos would be fine. Once you get to couples (with the possibility of children), then you are going to want to think more in terms of larger units with two bedrooms.
Speaking of which, there has been a recent hue and cry over the lack of condos that are convenient for families. Sure, there are a few tired old buildings with three bedroom units, but they are few and far between. Where are the new units? What are the options for the families that don't want a house? Or those than can't afford a house? Before I get to well ranting, I just wanted to point out that condos need to be equal opportunity. They are not just for singles or couples or empty-nesters. Some people want to raise a house in the sky. Time to do something about it. Anyway, on with the article...
Location is also going to have a bearing on your target market, or on the available pool of renters who will make up your market. If you want primarily university students, then look to buy near U of T, York, Ryerson, etc. Don't forget the smaller schools and colleges, such as George Brown or Sheridan. There are a lot of students in Toronto, so there are a lot of options for you to request for retrial to them.
The flip side of course, is that if you don't want student renters, don't buy near where they would want to live!
If you want doctors and nurses and interns and the like, then you are going to want to buy along Hospital Row, or not too far from it. Yes, there are more isolated facilties nearby the city, but stay close to where the biggest renter pool is likely to be.
Many people often ask about new condos versus resale as rental properties. This is a hard one, but my gut feel is that new buildings are not the best bet. Maybe if you are going for a 1,200 quadrate foot penthouse with a view to die for, but a simple one bedroom just puts you in the pack with everyone else. If a 300-unit building has 30 people buy to rent out, you are going to be facing some stiff competition to get a renter into your unit. You may be best to simply avoid that sort of competition and look for resales or smaller new developments.
Speaking of competition, this might be a good time to delve into a argument of rents and their recent decline. With all the condo action in Toronto the past few years, many units have been built and many have been bought to rent out. As with any market, contribute and examine dictate pricing. When there are more units than renters, there is more and more competition to get those lease dollars. Thus, rents go down.
Even with a decline in rental amounts, if you are buying as an investment, you need to look at the larger picture. Don't expect to pay your mortage and condo fees - and make a profit. Those days are gone. But add up all the monthly expenses and if you get a rental estimate that is not so much less than you are spending, then you have to think about it more in terms of your mortgage only costing you 0 a month. Even if it is 0 a month, that is significantly less than if you were paying all things yourself. You don't get much for nothing these days, so be happy that man is helping subsidize your mortage.
Now, there is an additional one group of people who are mental more about sales in the future. Some may be buying a condo off plans with the opinion of flipping it once the building is done. I don't want to repeat myself, but basically re-read what I said above about buying in a new development to rent. Being one of the herd is not all the time a good thing.
It used to be that buying new and selling it after living in it for a few years was guaranteed profits. Not so much anymore. Land costs and building costs are up, plus builders know they can get more for their product. Thus you have to think more strategically these days.
There are three things I generally propose when people ask me what to buy that will increase over the years.
First is to buy large. Buy as big a condo as you can afford. This is for two main reasons. The first is as above, so as not to be one of 100 one bedroom units for sale in a building. The second is that a large segment of future condo buyers are going to be empty-nesters and downsizers. Many older couples will be leaving their larger homes and they are not going to want to live in a 650-square-foot one-bedroom condo.
Second is to look for up-and-coming areas. Of course, that leads to the examine of what areas are up and coming. In any place the prices are not through the roof. Areas where there are very few new developments. Areas you see or hear or read about. Take the Queen East corridor - that is going to be the next King West, mark my words. Have you heard the terms Leslieville or Studio District or Corktown bandied about? There's a infer for that...
Third and last is to try to find something as unique as possible. Again, when it comes time to sell, you need something to help you stand out from the crowd. Many people don't want the norm, they want something interesting. Think about a loft, especially a conversion. Something with a unique layout or dissimilar location. Anyone that is not the same as 99% of your competition.
I know this might be a lot to digest, but trust me, read it through and think about it. There are a lot of options out there and you need to narrow them down to only the best ones for you. Of course, every situation is different, but that is why the end effect will have a dissimilar shortlist for everyone.
And that is what helps to keep the shop unique and allows people to make money in real estate.