It is probably a good idea to diversify your portfolio by having a variety of investments. This will allow you to steer clear of the classic problem of putting all your eggs in one basket and help you avoid the risk of losing your savings in case there are major losses in a particular market.
In this pursuit, you should definitely consider investing in real estate. It provides a handsome passive income stream and a higher and more stable rate of return compared to, for example, the stock market. Importantly, investing in property means that you have a tangible asset at hand that can be sold off in the future at a considerably higher price since real estate appreciates in value over time.
In this regard, whether you are a local or a foreigner, it is worth your while to consider investing in Toronto’s condominium market to gain some serious bucks. Currently, Canada’s real estate market is witnessing a housing boom. Coupled with the fact that Canada, and especially Toronto, is a global melting pot that is witnessing a rapid population increase in the upcoming years, the property market’s growth and profitability are likely to stay.
In this article, we highlight the different strategies to consider when buying Toronto condos for a profitable investment in your future.
Always Hire A Realtor
Whether you are just starting out or are an experienced investor, it is always wise to hire a real estate agent to help you improve your search and narrow down on the best properties as per your budget and requirements.
For the Toronto condo market, which is fast becoming saturated with potential buyers, a realtor can guide you best by offering professional advice regarding equity gains or cash flows. They can share insights regarding the contractor and builder, the potential future of the particular property, and the possibility of obtaining premium rent. These are factors that will allow you to make a decision that yields the maximum profit.
Importantly, with Toronto’s 140 neighborhoods, it is natural for you to feel a little out of place when deciding on where to invest. This is where a realtor can help you ground yourself in the market and identify the best condo locations for a lucrative investment.
Always remember to consider accessibility and proximity to important facilities near the condo, which includes medical services, grocery stores, libations, transport facilities, and other life-enhancing amenities. This can help raise the premium you charge when renting out your condo.
Understand The Condo Market
When considering Toronto’s condo market, you need to anticipate bidding wars and a highly competitive buyer’s market. This makes it important to understand the condo market in order to make an informed decision.
When searching for condos to buy, check the sales to new listing ratio, which highlights the condos that have been sold in a month against new condo listings. Typically, as a buyer, you want to invest when the ratio is low so that you have an advantage. Currently, with listings skyrocketing, you have an advantage in the buyer’s market. However, you need to be proactive and quickly respond to listings that fulfill your checklist of requirements.
Secondly, keeping your finances in view, you will need to decide whether to look into pre-construction condos or resale properties. You also need to disclose if the property you are buying will be your primary residence or is a secondary investment you are making on the side. These factors will play into the type of down payment structures you will be required to pay.
Search for the best TAX and price options
We suggest that you discuss the tax implications of buying and future selling of your condo property with your realtor. The common taxes to be aware of include the Capital Gains Tax upon selling your investment property and Harmonized Sales Tax (HST), particularly for pre-construction homes. Added to that, as an investor, always seek out legal advice before buying or selling to know how much tax you will end up paying.
To help you determine the best deals, be aware of the price per footage to assess the viability of your investment. This is also highly dependent on whether you end up buying resale or pre-construction condo properties. Generally, opt for a low price per square foot to gain the maximum returns, especially if you are comparing condos in the same neighborhood.
Consider Up and Coming Neighborhoods
As a rule of thumb, you want to invest in gentrifying neighborhoods to benefit from increased property value. In this endeavor, it may suit you well to invest in preconstruction homes by buying in less developed localities that are projected to grow and flourish in the near future. This allows you to purchase at a relatively low cost and charge high rents or sell it off for a handsome profit in the future.
Ideally, you want to consider condos that have a smart layout, custom finishings, or unique market features. These will help fetch you great rents in the future. Additionally, you want to look towards investing in low-rise boutique buildings and condos that have outdoor spaces. These are experiencing a growing demand, especially during the current pandemic. Therefore, you should be forward-looking in your investment decisions to get value for your money.
A pro tip is to remember that generally, the resale value of a condo is tied to the number of comparable properties in the vicinity. This is why it is beneficial to invest in areas that tend to have a low density of buildings to avoid direct competition if you plan on selling your condo.
Overall, it is helpful to factor in the entire building, its age and condition, and its features rather than considering the condo you wish to purchase in isolation. You should consider natural light, plumbing, and other details during your market search. For instance, you should aim to buy condos in buildings that have differentiated offerings in terms of the size and layout. This works to your advantage when you eventually progress towards the sellers market as buildings that have a healthy mix of varying interior features tend to obtain a better price.
Parting Thoughts
Buying a Toronto condo has major benefits in the current property climate. We suggest that you conduct thorough research and avoid making hasty investment decisions so that you get the most bang for your buck. This will help ensure that you spot the best deals with the highest market value.
