If you’re looking to dive into real estate investing but don’t have the capital to invest in a development project or a single-family home, a condo may sound like a good compromise. Condominiums are generally cheaper than a detached home, and landlords have fewer maintenance issues, as the association takes care of the lawn and exterior of the building.
But just like any other investment, it’s important to thoroughly research all of the benefits and potential concerns you may face when investing in a condo.
“Too many Canadians are being seduced by the pretty pictures and stories of easy lifestyle and they end up buying into a building that is a time bomb of costs,” Kur Rosentreter, senior adviser at Manulife Securities Inc., told The Globe and Mail.
The Potential Pitfalls of a Condo Investment
Many potential investors consider condos because they sound like an attainable option. They’re cheaper than a detached home or the cost to buy into a major development project.
But experts warn that outside of the purchase price savings, condos may wind up costing more than a house.
In urban areas of Canada, the property taxes can be high. The monthly maintenance costs can also add up quickly. In addition to these costs, potential landlords must also consider that they are still responsible for the interior of the condo. If the water heater breaks, you will be in charge of replacing or repairing it.
Many condo owners also deal with unforeseen expenses. If the pool valve breaks or the community requires a major repair, condo owners will collectively be responsible for these costs.
The Potential Benefits of Investing in a Condo
Still, condos manage to remain a popular investment option, and buying in the right place has a lot to do with the success of your investment.
If the high-priced housing markets of Vancouver or Toronto are out of your reach, you may consider foreign investment if you have the means. In the United States, condo investments in along the Florida coast or in Myrtle Beach, South Carolina often provide a reliable stream of recurring income.
If you prefer to keep your investments in Canada, you may be able to capitalize on the high costs of single-family homes. Because homes are out of reach for many young people, they are left with no other option than to buy a condo.
While you must consider property taxes and maintenance costs, there is the benefit of not having to maintain the grounds. The association takes care of lawn and building maintenance. The only thing you’re responsible for is the interior of the home.
Additionally, condos offer unique amenities that attract certain types of people. Many have gyms, business centers and pools that residents are free to use. These amenities can be promoted to attract potential renters or buyers.
Ultimately, the numbers will determine whether a condo is a good investment. If you can get a nice return from selling or a decent income stream from renting, this investment option may be worth your while.