When it comes to condo investments, it’s all about the numbers. Except, of course, when it isn’t.
What features are deal-breakers for a potential tenant? What adds great value to an investment property?
We’ve put together the most and least important features to look for in a property so you can pick the best investment.
The Decision Makers
First and foremost and forever (and even after): price. An old real estate saying goes “you don’t make money on selling price, you make money on the purchase price.” And it’s true!
But getting the best price is a little bit of who-you-know, a little bit of what-you-know, and a whole bunch of getting there first. Meaning that the best price is offered first, but it’s usually at a pre-sale event only accessible to high-volume realtors and other industry folks.
A few more events here, an industry-wide promotion there, and then the units are put on the market to the public. At a higher price and with fewer units available - usually the condominium is about half sold. You want to get that elusive early price? Find a realtor who specializes in pre-construction condos (shameless self-promotion here… that’s me!) They usually get the VIP invites.
Neighbourhood is about more than just the “feel” of a condo. Yes, you want a trendy, upscale, urban neighbourhood for your condo. But you also want a high percentage of renters, amazing access to transit and work, and a thriving local culture. That’ll net you a big population of renters who want to live in your unit. You’ll be less likely to have vacancies or trouble finding a tenant. You should have your pick of the litter.
The best neighbourhoods? They’re established (or on their way), bustling, and populated with young professionals. If you want to read all about some of my favourite places to buy, check out my neighbourhood profiles on Yonge and Eglinton, or Corktown!
Incentives are mostly about price. I say mostly because they can impact the price - but without good incentives, that low price you purchased at probably won’t be the price you end up paying.
I’ve done a few blog posts on incentives, but here’s the gist: you want capped or totally removed development charges (which will save you up to $20,000 of out-of-pocket fees). You should negotiate for free or very cheap assignment (this is your exit strategy. It’ll save you if a financial emergency crops up between signing and move-in).
Another important incentive is capped or paid maintenance fees. They’re a much better deal than the same value as a discount (the math checks out!). Incentives like these can make even a market-priced condo a valuable investment. Pick the best ones.
The floor plan can be a major deal breaker. There are two things to keep in mind: first, you want to choose a style of unit that appeals to most renters. Second, you want to avoid some flawed floor plans that will turn off a potential tenant when they tour your unit.
As far as style goes, I often recommend one-bedrooms. They cost slightly less, and they’ll rent for slightly less too. But a larger population is looking for one-bedrooms, or a one plus den. You’ll double your rental pool over a two-bedroom. Plus, it’ll put you in the budget range of most singles and young couples.
For flawed floor plans, try to avoid things like a bathroom being right off the living room, and odd or awkward arrangements (no couches in the kitchen!) Balconies are a bonus, and kitchens are key. A great kitchen can sell a tenant on your whole unit.
The reputation of your developer matters. A lot.
Newer builders may be fantastic. They may be cheaper, better, or quicker because they need to establish themselves. This would be ideal. But we can never say for sure - we only know what a developer has delivered before.
Established builders have a reputation to uphold. They have repeat clients, shareholders, contacts and contractors that rely on them. And they rely on those relationships to continue their business. They are, hopefully, a known quantity. Invest in the known quantity.
Don’t get me wrong, amenities are important. Many tenants are looking for great security, working elevators, and a simple gym. But extra amenities won’t sell your tenant on a unit they don’t like. And more amenities means more maintenance fees.
I’m not recommending actively avoiding things like squash courts, wine storage, movie rooms or rock climbing walls - but I would prioritize almost everything else before them. Your purchasing decision should be based on the numbers, and these things add to your monthly costs. Ignore the marketing.
Again, some features are much more important than others. Quality kitchen appliances are key. I once lived in an apartment with a mini-fridge and no freezer. I will never, ever do that again!
But high-end appliances and features aren’t as important as you might think. I would say look for all things modern (and avoid carpet like the plague). But don’t be swayed by the “best of everything” mentality. You’re not going to live there, a tenant is. And they’re looking for a great price, just like you.
I hope this makes your decision making easier! Good luck, and remember I’m always here to help.