Condo investor checklist : Location, amenities and low maintenance
Successful condo investors know that there are a number of key considerations to keep in mind when selecting a property that will reap them a solid return on their investment.
Here is a rundown of what investors should be focusing on in their search for a profitable rental property.
In the GTA’s increasingly expensive housing market, affordability tops the list of considerations for investors. A condo unit should be purchased at a price you can afford to carry, and you’ll need to consider condo fees and property taxes alongside sale price.
Also keep in mind the costs of routine upkeep for the property, particularly as you begin renting it out, and the potential for damage rises (hopefully it’s minor.) Speaking of damage, you will need to cover the cost of insurance for the condo unit; this is required by condo corporations.
Make sure you’re doing a cost benefit analysis of all of this to be certain that the rental income you get not only covers your carrying costs but also provides a bit of profit on top. The goal is to be cash flow positive, but it might take a year or two to get there.
Be mindful of a property that will require maintenance outside the routine needs, such as lawn mowing or snow shovelling. Buildings with swimming pools, for example, will have higher maintenance and common element fees down the line, which will cut into the rental income potential for the investor.
Room to grow
Space is a key consideration, especially with more families looking to live in condo properties versus actual houses, which are getting out of most people’s price range — buyers and renters alike. Two-bedroom, two-bathroom rental units with parking and storage will see greater demand from tenants who are willing to pay higher rental rates in order to have more room. If buying close to university or college, larger units can accommodate more residents, which helps students share the monthly rent.
The essential element in the assessment of any condo property’s potential. The condo will have much greater value as a rental unit if it is close to transit, universities and colleges, and retail offerings. It should be noted that many new condo developments — such as the Regent Park revitalization in Toronto — are helping to reshape communities for the better. And the value of condo units in these areas is seeing significant growth as a result.
Nearby employment opportunities should be a key consideration when assessing whether a condo unit will carry greater value as a rental property, such as locations that are close to work nodes. Basically anything in downtown Toronto, where much of the younger talent is flocking nowadays, will generate a stronger rental income.
Amenities are definite value-add when it comes to rental properties. Gyms, party rooms with catering kitchens, front desk/ concierge service, bike parking and storage — all of these will translate into higher rental rates. The same is true for community amenities. A building will see far more renter interest if it’s close to parks, trails and libraries, with a variety of nearby shopping, dining and entertainment options. And that increased demand will mean more rental dollars.
DEBBIE COSIC, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for more than 25 years.