This is a question we get asked a lot. Make no bones about it, we here at CONNECT love condo investing. That’s pretty clear to anyone who knows us. We have the best jobs in the world – we get to connect investors to one of the greatest investment vehicles available!
But why are we so passionate about this form of investing?
Our love of condos isn’t blind or unfounded. There are many reasons to prefer condos over single-family homes. And in today’s article, we’ll fill you in on a few reasons why we feel this way.
When comparing condos with single-family homes, there’s a whole slew of considerations. For example: do you enjoy yard work like cutting grass, pruning trees, cleaning gutters, and – perhaps worst of all – shoveling snow?
When buying a condo, these are things you don’t have to worry about as much. For a home however, whether you’re planning on living in it or renting it out, someone has to worry about daily outdoor maintenance. With condos, you have almost none of these concerns. Your condo fees contribute to employing others to take care of jobs like shoveling, maintenance, and cutting grass.
Repairs, too, are always a concern with any real estate. The repairs and maintenance associated with condos, in general, tends to be less expensive than with single-family homes. There are certain big tickets items in a home that simply aren’t considerations for a condo. Think of new shingles for a roof, or repaving a driveway, or sealing a basement, or foundation cracks, or replacing windows. All of these concerns are either non-existent or minimized when it comes to condo investing.
Regarding condo investing, there is also less of a need for property management. Because a single-family home requires more maintenance on average, the need for property management is greater. Condos, particularly new-builds, require very little management, at least compared to single-family homes.
One of our favorite perks of condo investing however, is location. If you like being in, or investing in, where the action is, then condo investing is much more appealing than single-family homes.
For the latter, you typically need to be in suburban markets, rather than central downtown locations. It isn’t necessarily a bad thing to be in the suburbs, but we much prefer the central areas.
One common criticism of condo investing are the condo fees. In some markets – especially in the US – the cost of condos and houses are comparable. That means the condo fees have a significant impact on your investment decision. So in these markets, condo investing might not make sense. But in Toronto, the difference is staggering.
At $638,900, the benchmark price of an attached home in Toronto is unaffordable to many. Condo apartments have a much better benchmark price tag at $352,000. That’s almost half the cost of an attached house! Considering a detached home? Expect to pay an average of $826,400. Average!
To show you just how staggering the differences are, we’ll use an example to illustrate our point. Let’s use these benchmark figures to compare an attached home with a condo apartment.
For this example, let’s also say you buy and plan on holding the property for five years.
Let’s also say your condo fees are as high as $600 a month. That would mean you’re paying $7200 per year in condo fees. Over five years that’s $36,000. Wow, that seems like a lot of money!
Keep in mind, of course, that anything done over this amount of time will look expensive. If you buy a $2.50 Starbucks coffee every morning, you’re paying $912.50 for coffees every year. And over five years, that’s $4562.50. All that money on coffee alone. At least you’ll be alert! But I digress.
Back to the example. Let’s tack that $36,000 you’ll be paying in condo fees to the purchase price. Now you’re looking at a $388,000 investment instead of a $352,000 investment.
That’s…actually not that bad. And consider all the services you get for those condo fees. That’s a great piece of mind! Not to mention they are tax deductible.
That extra $36,000 over five years is a drop in the bucket compared to the cost of an average attached home. Condo fees included, you’re leaving $250,900 on the table for other investments! Which could go toward additional condo properties.
Because of the skyrocketing prices of single-family homes in the Toronto area, many investors are choosing the condo option. We don’t blame them!
This isn’t only because they are reasonably priced, but they are also easier to maintain, rent out, better located, and have historically low vacancy rates.
I remember when I bought my first duplex in Leslieville many years ago. I sold it after 7 years because the upkeep just burned me out. I replaced a chimney, roof, and several windows within those 7 years and it cost me over $50,000 in 3 lump sum payments. Ahhh do I ever love condos!
If the perks don’t get you excited enough, then the numbers should speak for themselves. As you can see, there’s lots to love about condo investing. That’s why when it comes to condos vs. single-family homes, we pick condos!
Ryan Coyle, Co-Founder CONNECT Asset Management