Buying a Condo as an Investment

Not too many years ago, buying a condo was considered a compromise move. Condos are more affordable, particularly for first-time buyers who have a tough time breaking into the housing market. Until recently the cheap entry fee entitled you to apartment-style living, no yard to call your own and lusterless appreciation—not an attractive package to most home buyers.

This may be changing. Latest statistics from Canadian Mortgage and Housing Corporation (CMHC) show condos make sense for investment or ownership. Rentals are increasing every year according to recent market statistics.

New construction favouring condos
Recent statistics show that construction of condos is actually increasing. New construction of singles and semis has fallen steadily since 2002. Young people seeking a downtown lifestyle, empty nesters downsizing, and people tired of commuting, all make condos extremely popular and support a robust market.

Hi-rise sales stable
Condo sales have had some ups and downs, but sales volume by year has been quite steady. The rental market for condos is improving as potential first time buyers postpone home purchases in favour of renting. Renters are less inclined to leave their apartments and pursue home ownership.

Is a condo a good investment?
As with any real estate, a condo could be a good or bad investment. It all depends on the building and the market. There are some great condo investments in many areas around the country and there are also some bad investments.

The condo situation looks promising. The percentage of total sales is expected to continue rising from 25% of all sales in 2010 to 35% this year. Condos are selling well and renting well, making them a good investment whether you’re planning on moving in or leasing out.

Condo buying tips:
Look for a condo that’s in a development that has a high ratio of owner-occupants to renters. Some lenders won’t lend on condos that have a high rate of absentee ownership. Also, owner occupants tend to be more concerned about keeping things going well in the development.

Find out what the condo fees are and what is covered by this fee and include it in your costing. Some condos prohibit pets, and some have parking, storage and renting restrictions. Read and understand the Covenants, Conditions and Restrictions (CC&Rs) and any other pertinent governing documents before you complete a purchase.

It’s usually best to avoid buying into a condo complex where the homeowner’s association is involved in litigation. To find out if there are any other association issues that you might want to avoid, read copies of the minutes from recent homeowner’s association meetings. One of the best ways to get the straight scoop on a condo project is to talk with some of the current residents. Find out what they like and what they don’t like about living there before you decide to buy.

What are the tax, legal, and financing considerations?
If you decide to invest in a condominium rental property, many of your personal expenses may be deducted from income in addition to the normal tax deductions such as mortgage, interest, depreciation, and other condominium-related expenses.  If you are seriously contemplating investing in a condominium, it is important to consult your real estate agent and seek the advice of a competent tax and accounting professional, and legal advice from a lawyer specializing in condominium law.