Investing in an income property through leasing is a surefire way to earn a steady long-term return. Many people buy properties such as condos not to live in them but to rent them to other people. You can take advantage of the fact that lands are limited and pricey, which drives people to buy condo units instead. In Toronto, condos have sprouted as a result of people’s demand for affordable housing that’s near their places of work or study. However, even condo prices may be unaffordable for many buyers that they resort to renting throughout their lives.
Think before you invest
Before you plan to spend money to buy a condo unit you’ll rent or resell, first, you have to weigh the advantages and disadvantages. For instance, even at an annual lease of CAN$20,000, it will take you 30 years to recoup your CAN$600,000 condo unit investment. Would there be even anyone willing to rent that high for a dingy unit found on the 40th floor in the first place? Do your research first and calculate if the return would be quick and large enough to be worth your money. At the very least, investing in an income property in a Toronto condo would be unwise if it takes more than five years to have your outlay recovered.
It’s all about timing
You can still earn a windfall if the condo you buy satisfies three conditions: (1) it is located in a strategic area near or within Toronto; (2) you bought it at a cheap price, ideally at CAN$100,000; and (3) someone is willing to pay the high price for a period lasting ten years or more.
When you say that the condo is strategic, it is several steps away from roads or modes of transport, such as bus stops or train stations. Second, it should be located below the third floor. Third, it should be near food stores, restaurants, and schools. You have more leeway in imposing as much as CAN$100,00 as an annual lease if your site is located in such an ideal environment since many rich people would be willing to pay the price for their convenience.
You are sure to attract a high demand as well despite the steep lease price tag because of its geographic value. Additionally, the people you would attract are likely well-endowed with money to pay you in the long run, thus assuring your financial independence.
Whether you believe it or not, there are downtimes in the real estate market that you can take advantage of when seeking condo units to buy. During prolonged recessions, people are wary of buying houses.
Real estate developers would be under pressure to sell their units for a drastically-reduced price to recover as much capital as possible. It is during these times you can invest in a condo unit found in a strategic area that would be otherwise millions of dollars worth. If you can’t find strategic units for sale, you can try buying two or three units for the price of one. You can think of the marketing later on, once the market has returned to normal.
You also need to know the legal and financial ramifications of your investment. If you buy your unit using mortgage money, you would have to notify the lending institution if you plan to rent it out. After all, if you have not finished paying your mortgage, the financier would always be part owner of your condo unit. They might approve of your plan to have your unit leased to someone else, but expect the mortgage interest payments to increase. Real estate companies consider renting a still mortgaged property a risky option.
The company selling the condo unit might also be unwilling to let owners lease their rooms to other people. To minimize such instances, read the terms of your purchase agreement to see if the condo company imposed limitations that could hinder you from achieving your financial goals.
If you’re looking to buy a home in Toronto, get in touch with us today to see how we can help.