By the way, at the Investor Forum we were nominated for the Top 2016 Investor Award, but we didn’t end up winning. We were humbled to be nominated, and comforted by the fact that we won the same award in 2015. But I digress.
The conversation with this investor gave me the inspiration for this article. What follows are our top 6 tips for Toronto condo investing. Get out your notepad!
We are all aware of the old real estate mantra: “location, location, location.” We tend to subscribe to this philosophy. Good news for Toronto condo investors, there are many fantastic neighbourhoods and developments to choose from. We will touch on specific neighbourhoods in future articles, so stay tuned.
If you are unfamiliar with particular sub-markets or developments, make sure you spend some quality time in that area. Another good idea is to chat with someone who knows the area intimately and can give you advice.
Currently, our favourite locations in Toronto are Toronto’s Waterfront and the Downtown Core.
Complete your due diligence and spend time researching the developer behind the particular project you’re interested in. Scour the internet, analyze their completed developments, talk with the developer staff, and chat with current owners.
If possible, have a discussion with someone who currently lives in, or better yet invests in, that developer’s completed project. If you are unsure about exactly what you are looking for, check out CMHC’s guide to condo’s.
Or, you can speak with a trusted investing advisor such as myself.
It goes without saying that you need to analyze the project very closely. What makes this project different from others in the area? But just as important to ask, is what is your ideal tenant going to be drawn to?
Certainly, a hot yoga studio is nice and all, but does it fit your target rental market? Is it too luxurious and you will just end up paying for premium amenities while receiving mediocre rent? Or maybe your target market is upper-middle class professionals who will jump at the chance to be able to tell their friends they have access to six Greek marble baths.
I don’t even know what a Greek marble bath is, but it sounds fancy. Be sure to know exactly who you will be targeting as a renter before you pick a particular condo project and unit.
You can’t know everything. That’s why every experienced investor knows to create a team of professionals, who know their trade. So, start surrounding yourself with a power team that will help drive your real estate investing success.
This includes a real estate broker, lawyer, accountant, and much more. All these team members should specialize in real estate investments.
Make sure you always consider the unique features of your development and unit. Think about what can you use to differentiate your unit from others. This includes layout, parking, amenities, views, and condo design.
Run calculations on how much a certain upgrade will cost you compared to your estimated rent.
For instance, getting a corner unit with a better view may cost an extra $40,000. But spread that out over 25 years at 3% interest, you’re looking at $189 extra a month. Can you get a higher rent to cover this? It might be worth it if you can pass on the cost to your renters.
With low vacancy rates in Toronto these days, finding a renter shouldn’t be a problem. But, you always want to set yourself apart from other units no matter what.
Parking is always a hot topic among investors. With help from the right professional they can help you to decide if it is a wise investment.
Consider however that parking values are rising faster than condo prices, according to Shaun Hildebrand, Senior VP at Urbanation.
Indeed, parking spots are increasingly becoming a sought after and scarce asset, particularly in downtown Toronto. Keep in mind that even if your tenants don’t want a parking spot, you can advertise the spot to other owners in the building.
Last but not least, we often have people asking us about market timing.
“Ryan, I have a friend who keeps telling me to wait a few years and the market will dip. He thinks I can save myself tens of thousands of dollars” my client Seb tells me one afternoon.
Seb isn’t alone. But this isn’t the best advice. Unless Seb’s friend owns a crystal ball. Thinking that you can time the market is like playing roulette at a casino. More often than not, the house wins.
Commentators have been saying since I started my real estate career 15 years ago, wait a year or two and you’ll get a better price on a housing market dip. If I had a nickel for every time someone peddled a doomsday scenario for the Toronto housing market, I would have my real estate portfolio paid off by now.
For buy-and-hold investors, market timing can be a fool’s errand. You buy with the intention of holding for decades, so driving yourself crazy trying to get the perfect purchase timing isn’t productive.
For markets with strong fundamentals, like Toronto, timing is secondary to all the above tips. We believe the time to buy is now, rather than waiting, thinking prices will dip at some unknown time in the future.
Developments are running out of land to build on, prices continue to increase, and sales get stronger year-over-year.
“My prediction, and I’ve been pretty accurate to date, is we are going to have a 30-to-40 percent increase in values of the condo market in downtown Toronto over the next three to four years,” Barry Fenton, CEO of Lanterra Developments
Fortunately for you and our clients, CONNECT asset management has you covered on all the above fronts. We have already done all our due diligence on a number of Toronto condo developments and are ready to share that with you. Get in touch with us and we will gladly sit down with you for a no obligation briefing session.
Ryan Coyle, CoFounder CONNECT asset management