Toronto Condo Investing: The Case For Adding A Toronto Condo To Your Portfolio - toronto-condo-investing-adding-condo-portfolio

Toronto Condo Investing: The Case For Adding A Toronto Condo To Your Portfolio


Expert Analysis

A long-time friend of mine called me up a few days ago. He is thinking about buying a condo in Toronto. “Matt, you’ve told me about your success investing in Toronto condos over the last few years. I don’t want to sit on the sidelines anymore, I’m ready to get a piece of the action,” Sam told me over the phone.

“Glad to hear it Sam, come by my office and we will have a…” I was interrupted.

“And did you see the recent Toronto Real Estate Board figures? That’s amazing, are there still opportunities for people like me?” Sam said anxiously.

“Of course there are, let’s meet up this afternoon and go over this in more detail.”

Sam was referring to the recent sales release from the Toronto Real Estate Board (TREB). Year-over-year sales growth for Toronto is at 15.8% for Q1 of 2016. And, for March 2016, the growth rate is 16.2%.

The record-breaking Q1 results are based on a number of strong fundamentals. One of the most important factors for us here at CONNECT Asset Management are upbeat consumers with strong home-buying intentions. Sam is now part of this group.

Meeting up with Sam turned out to be a win-win situation. I gave him the extra confidence he needed to take his investing to the next level. He inspired me to write this article. What follows is a summary of the three discussion points Sam and I discussed in relation to Toronto condo investing.

Toronto Condo Investing Reason #1 – High Demand, High Cash Flow

Yes, the Toronto market is more expensive to break into. But is the payoff there? Absolutely. Here are the average monthly condo rental costs in Central Toronto as of December 2015:

  • – Bachelor: $1,350
  • – One Bedroom: $1,653
  • – Two Bedroom: $2,236

You read that right. Those are the average. If you’re investing in pre-development like we suggest, the returns can be even greater.

Couple the above average rents with the fact that Toronto has one of the lowest vacancy rates in Canada. The national average is 3.3% for Canada’s 35 largest cities. Toronto’s vacancy rate is a mere 1.6%.

Toronto Condo Investing Reason #2 – Affordability

I can hear your objections already. “Affordability? In Toronto? Are you nuts?” No, I’m not nuts. Investing in a condo in Toronto is more affordable than you might think.

While the price of single-family homes continue their rise, condos are a great alternative for a relatively reasonable price. According to TREB, the average cost of a detached single family home in the 406 area is a lofty $1.2 million. A semi-detached? $840,000. But, the average cost of a condo in the same area? Just over $400,000. Again, consider that these are averages.

Condos are even more affordable if you buy early with pre-development. On top of great discounted prices, condo developers often throw in bonus upgrades for getting in on the ground floor with them. Buy for tomorrow at today’s prices.

Toronto Condo Investing Reason #3 – Appreciation

Toronto condo investors have seen steady appreciation over the last few years. TREB reports that between Q4 of 2014 and Q4 of 2015, condo prices rose 4.1%.

While not quite as staggering as the increase in the price of single-family homes, many experts are projecting massive growth in the Toronto condo market over the next few years.

Barry Fenton, CEO of Lanterra Developments, has predicted the values of condos in downtown Toronto to increase in value by 30-40% over the next three to four years. Toronto condo developers may face some challenges as it is becoming increasingly difficult to find new land for construction.

Couple this with the rapid rate at which single-family homes are becoming unaffordable, the Toronto condo market continues to be appealing to investors. As The Star reported late last year, “Condo sales…were up almost 14 percent as more people searched for alternatives to low-rise detached, semi-detached and townhomes, which continue to climb out of reach.”

The same article continues, “strong demand helped push up condo prices by 9.5 percent in the City of Toronto.”

So, What Does This All Mean For Toronto Condo Investors?

And now, for the million dollar question (or I should say, 400,000 dollar question): what does this mean?

For us at CONNECT Asset Management, it means condo owners and investors will experience appealing returns in the coming years. While the best time to invest was yesterday, it’s not too late.

As a result of our chat, Sam is now buying his first investment condo. Let’s talk about your specific situation and how we can help.

Good luck!

Matt Elkind, CoFounder CONNECT asset management

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