Tips on Condo Investment in Toronto

To help determine if buying a Toronto condo as an investment property is right for you, we’ve put together a list of pros and cons, as well as some strategies for success.

By Emily Southey | 13 minute read

Purchasing a condo is one of the best real estate investments a person can make. But before you take the plunge, it’s important to understand what condo ownership entails and the pros and cons of purchasing a condo in Toronto. Luckily, the experts at Wahi are here to help. We dive deeply into the process of getting started with condo investing below. 

 –

What Is a Condo?

A condo or condominium is a single unit within a multi-unit property. Condo buildings come in all shapes and sizes. They are usually apartment-style buildings, though they can also be townhouses or freestanding homes. Even among apartment-style buildings, condos can be highrise buildings with hundreds of units or small, walk-up buildings consisting of two or three units only. 

 –

When you buy a condo, you are purchasing the individual unit. However, you will also own an equal share of the common areas and amenities of the building with the owners of the other units. Common areas and amenities vary by building but may include fitness rooms, parks, pools, playgrounds, cinemas, dog-walking areas, and more. 

 –

Common areas of condo buildings are typically managed by a condo association, which acts as a supervisory board and hires a property management company to manage the property. When you buy a specific condo unit, you are often required to become part of the condo association, which means paying a monthly fee to cover the expenses incurred by the association. In addition to these monthly condo fees, condo owners must also be prepared to pay the typical expenses associated with property ownership (for example, property taxes, utilities, and more).

 –

The Pros and Cons of Investing in Condos

To help you determine if a Toronto condo is right for you, we outline the pros and cons of condo investments below. 

– 

The Pros

• Minimal maintenance responsibilities: One of the main pros of investing in a condo is convenience. When you buy a condo, you don’t have to worry about the physical upkeep or repairs of the building. In fact, many condo buildings in Toronto have a skilled team of maintenance professionals whose sole job is to handle repairs and maintain the building. This is a major pro for investors who don’t have the time to manage an investment property themselves. 
• On-site amenities: Many condo buildings in Toronto have luxurious amenities that can make your investment property more appealing to tenants. For example, a condo building might have everything from swimming pools and saunas to fitness rooms, cinemas, rooftop terraces, and more. Convenient access to these on-site amenities is yet another reason why condos make such good investments. From young professionals to retirees, condo amenities can be a major selling point. Plus, some of these amenities, such as garbage pick up, snow removal, or security, mean even less work for you. 
• Increased security: Condos are one of the most secure real estate investments in terms of safety. Buildings often have 24/7 security personnel, as well as locked or gated entrances and elevators, reducing the odds of crime, such as theft. 
• Proximity to the city: Condos often represent a lucrative investment opportunity, in part because of their proximity to major urban areas. Though buying a house in Toronto might be out of reach, purchasing a condo in the city is often feasible and is likely to appreciate in value owing to the prime location (in fact, condos in major cities often appreciate more quickly than condos in suburbs). For example, many condo buildings in the City of Toronto are located near restaurants, retail centres, entertainment venues, as well as the TTC.

–

The Cons

• Strict condo association rules: As mentioned, buying a condo likely means paying condo association fees. But it also sometimes means dealing with strict condo association rules. For some investors, following someone else’s rules can be frustrating, especially if you want to renovate your unit. In many cases, condo owners must obtain permission from the condo association to make changes to a unit. And if the association were to deny your request, you may have little recourse. 
• No guarantee of appreciation: As is the case with any real estate asset, there is no guarantee of appreciation. While doing extensive research and consulting with a real estate professional can help you choose the right location and make an informed decision, any time you invest in real estate, you run the risk of the property depreciating rather than appreciating. 
• Lack of liquidity: The lack of liquidity with condo ownership is another con. This is not unique to condos but is still worth mentioning. No matter what type of real estate you own, you would not be able to sell it quickly and gain access to cash the same way you would with a stock or even a real estate investment trust (REIT). Rather, selling a condo can take months and if you were forced to sell it after an emergency, you could end up losing money on your investment. 
• Shared costs: Since part of condo ownership involves sharing costs with the other owners, you will be responsible if another resident damages a common area or involves the community in a legal dispute, even if you had nothing to do with it. Therefore, before investing in a condo, make sure you are prepared for this reality.

How to Get Started With Toronto Condo Investing

Ready to invest in a Toronto condo? Follow the steps below to get started.

 –

1. Find a REALTOR® who specializes in condos

Once you’ve decided you want to invest in a condo, the first step is to find an experienced REALTOR® who specializes in condos and has extensive knowledge of the local market. A REALTOR® serves as your advocate throughout the condo-buying process, which means you should choose someone who you trust and who has a proven track record in condos. Ideally, you should also find a REALTOR® who has experience working with investors and a keen eye for strong investment opportunities. A knowledgeable REALTOR® should help guide you through all the steps of buying a condo, from scheduling visits to reviewing condo association rules to making and negotiating an offer. A good REALTOR® will also be able to make you aware of condo developments in your area and any issues they may have, such as financial or infrastructure problems. They will also know which developments have the highest resale values, which is especially important for investors.  

 –

2. Decide what amenities matter most

To help you narrow down your options when buying a condo in Toronto, it’s a good idea to decide what amenities matter most. Condos offer a wide variety of amenities. Some have the bare minimum (garbage pick up, snow removal), while others have all kinds of luxurious amenities, including gyms, swimming pools, saunas, cinemas, and more. Consult with your REALTOR® to determine which amenities have the greatest impact on resale value. After location and price, on-site amenities are the next most important factor when it comes to finding a worthwhile rental property. Come up with a wish list and use it to narrow down your pool of potential properties even further. 

 –

3. Research the property management company

Step three is to research the property management company of any prospective buildings. Most condo buildings use property management companies to maintain and manage the property. As a potential investor, you have an interest in the property being well-maintained. It can be extremely frustrating to pay expensive condo association fees only to discover that the amenities and common areas are not well taken care of. This may be especially true if the condo association has a bylaw saying that you must work with that property management company to rent out your unit. To avoid any issues, ask who is in charge of the day-to-day when touring condos. From there, do your own research into the company’s reputation. This should involve researching the other properties they manage and talking to other owners or board members to see if they are satisfied with the services provided. 

4. Carefully review all association fees and rules

The final step to purchasing a condo in Toronto is to carefully review all condo association fees and rules. Condo association fees can be expensive and must be factored into your budget, along with property taxes, utilities, mortgage payments, insurance, and more. However, beyond asking about the cost of these fees, you should also request a detailed breakdown of what these fees include. This will give you an idea of any additional expenses that may be incurred. It’s also not uncommon for condo association fees to increase, so we recommend asking how often and by how much these fees increase annually. 

 –

Beyond fees, investors should inquire about the condo association’s rules. Common examples of association rules include noise restrictions, rules about booking common areas in advance, pet restrictions, and perhaps most important, rental restrictions. For instance, a condo owner may only be able to lease their unit to a tenant who has been approved by the board. Further, you should find out how the condo association or property management company that operates on its behalf handles issues or complaints. Understanding the fees and rules ahead of time can help you figure out which building is right for you.

 –

Tips for Investing in Toronto Condos

Ensure your condo investment is as successful as possible by reading the tips below. 

 –

Do your research and plan carefully

Real estate investing requires extensive research and planning, whether you want to buy a condo, single-family home, or an entire apartment complex. Part of this research pertains to budget. Avoid overextending yourself or spending beyond your means by getting pre-approved for a mortgage. This will give you an idea of how much you can realistically afford to spend. From there, research different locations, conduct a comparative market analysis to ensure any properties you’re interested in are appropriately priced, and look up the condo fees and landlord-tenant regulations in your area. When you are ready to take the next step, consult with a REALTOR® who specializes in condos and can help you identify units with strong investment potential.

 –

Decide between a pre-construction and resale unit

When you decide to invest in a condo, there are several decisions you will have to make. One decision is whether to buy a pre-construction or resale condo. Both come with unique advantages and disadvantages. Pre-construction condos are often less expensive than their resale counterparts, however, they can face delays, which means it might take longer to generate income from your investment. On the other hand, resale condos are usually more expensive but the lead time is shorter and you can avoid the stress of a potential construction delay. 

 –

Opt for larger over small units

If you can afford it, opt for a larger condo unit over a smaller one. While small condo units might be lucrative when it comes to rental income, studio and one-bedroom apartments are typically harder to sell. They also severely restrict your rental demographic to singles living alone or couples without children. 

 –

Choose a room with a view

A nice view is a major selling point of any property but especially a condo. If you can find a unit that overlooks a park, lake, or vibrant cityscape, buying it is often worth the higher price tag. Alternatively, condos that overlook alleyways, parking lots, high-traffic streets, or garbage pickup areas may be much harder to find tenants for them, let alone sell.